SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K / 405
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File
December 31, 1999 Number 1-1550
CHIQUITA BRANDS INTERNATIONAL, INC.
Incorporated under the I.R.S. Employer I.D.
Laws of New Jersey No. 04-1923360
250 East Fifth Street, Cincinnati, Ohio 45202
(513) 784-8000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
- --------------------- --------------------
Common Stock ($.01 par value) New York, Pacific,
Boston
$2.875 Non-Voting Cumulative
Preferred Stock, Series A New York
$3.75 Convertible Preferred
Stock, Series B New York
Securities registered pursuant to Section 12(g) of the Act: None
Other securities for which reports are submitted pursuant to Section 15(d) of
the Act:
9-1/8% Senior Notes due March 1, 2004
9-5/8% Senior Notes due January 15, 2004
10% Senior Notes due June 15, 2009
10-1/4% Senior Notes due November 1, 2006
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 15, 2000, there were 66,431,497 shares of Common Stock
outstanding. The aggregate market value of Common Stock held by non-
affiliates at March 15, 2000 was approximately $163 million.
Documents Incorporated by Reference
Portions of the Chiquita Brands International, Inc. 1999 Annual Report to
Shareholders are incorporated by reference in Parts I and II. Portions of the
Chiquita Brands International, Inc. Proxy Statement for the 2000 Annual
Meeting of Shareholders are incorporated by reference in Part III.
CHIQUITA BRANDS INTERNATIONAL, INC. TABLE OF CONTENTS
Page
Part I ------
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Item 1. Business . . . . . . . . . . . . . . . . . . K-1
Item 2. Properties. . . . . . . . . . . . . . . . . . K-7
Item 3. Legal Proceedings . . . . . . . . . . . . . . K-8
Item 4. Submission of Matters to a
Vote of Security Holders . . . . . . . . . K-8
Executive Officers of the Registrant. . . . . . . . . . K-9
Part II
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Item 5. Market for Registrant's Common
Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . K-10
Item 6. Selected Financial Data . . . . . . . . . . . K-10
Item 7. Management's Discussion and
Analysis of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . K-10
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk . . . . . . . K-10
Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . K-10
Item 9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure . . . . . . . . . K-10
Part III
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Item 10. Directors and Executive Officers
of the Registrant . . . . . . . . . . . . . K-11
Item 11. Executive Compensation. . . . . . . . . . . . K-11
Item 12. Security Ownership of Certain
Beneficial Owners and Management. . . . . . K-11
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . K-11
Part IV
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Item 14. Exhibits, Financial Statement
Schedules, and Reports on
Form 8-K . . . . . . . . . . . . . . . . . K-11
Signatures . . . . . . . . . . . . . . . . . . . . . . K-12
This Annual Report on Form 10-K includes, in Items 1, 3, 7, 7A
and elsewhere, statements that may be deemed "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
All statements included in this report, in future filings with the Securities
and Exchange Commission ("SEC") and in written and verbal statements by the
Company and its representatives that address events, developments or financial
results that the Company expects, believes or estimates will or may occur in
the future are forward-looking statements that are intended to be covered by
the safe harbor provisions of that Act. These statements are based on the
Company's assumptions and estimates made in light of its experience and
analysis of historical trends, current conditions, expected future
developments and other factors it believes are appropriate under the
circumstances. They are subject to a number of assumptions, risks
and uncertainties, many of which are beyond the control of Chiquita, including
the prices at which Chiquita can sell its products, the costs at which it
can purchase or grow (and availability of) fresh produce and other raw
materials, currency exchange rate fluctuations, natural disasters and
unusual weather conditions, operating efficiencies, labor relations, access
to capital, actions of governmental bodies, and other market and competitive
conditions. Investors are cautioned that the forward looking statements
speak as of the date made and are not guarantees of future performance.
Actual results or developments may differ materially from the expectations
expressed or implied in the forward-looking statements.
PART I
ITEM 1 - BUSINESS
GENERAL
Chiquita Brands International, Inc. ("Chiquita" or the "Company") is a
leading international marketer, producer and distributor of quality fresh
fruits and vegetables and processed foods sold under the "Chiquita" and other
brand names. The Company has capitalized on its "Chiquita" and other premium
brand names by building on its reputation for quality and worldwide leadership
position in the marketing, distribution and sourcing of bananas and other
fresh produce. In addition, in recent years, the Company has expanded its
processed fruit and vegetable operations, primarily through acquisitions of
vegetable canning companies.
The Company conducts business in two segments, organized primarily on a
product line basis, with each segment offering a variety of different but
related products. The Fresh Produce segment includes the production,
transportation, distribution and marketing of Chiquita bananas and a wide
variety of other fresh fruits and vegetables. The Processed Foods segment
consists of the production, distribution and marketing of the Company's
private-label and branded canned vegetables, branded fruit and vegetable juices
and beverages, processed bananas and edible oil based consumer products. No
individual customer accounted for more than 10% of the Company's consolidated
net sales during any of the last three years. Financial information by
business segment and geographic area for the last three years is set forth in
Note 13 to the Consolidated Financial Statements included in the Company's
1999 Annual Report to Shareholders.
In 1993, the European Union ("EU") implemented a banana quota regime
which restricts the importation into the EU of bananas from Latin America,
Chiquita's primary source of fruit. The quota regime has significantly
affected the worldwide banana industry and severely burdened Chiquita's
operations. Since 1993, the Company has reduced operating costs and taken
other measures to adjust to the quota regime. For a discussion of the EU
quota and other factors affecting Chiquita's results of operations, liquidity
and financial condition, see "Management's Analysis of Operations and
Financial Condition" included in the Company's 1999 Annual Report to
Shareholders. Factors that may cause fluctuations in operating results are
also discussed below.
Fresh Produce
- --------------
The Company markets an extensive line of fresh fruits and
vegetables sold under the "Chiquita" and other brand names. Chiquita's fresh
fruits and vegetables include bananas, berries, citrus, mangoes, melons,
tomatoes, lettuce, mushrooms and a wide variety of other fresh produce. Fresh
Produce sales, as a percent of consolidated net sales, amounted to 80% in
1999, 82% in 1998 and 90% in 1997. In 1999, approximately half of Fresh
Produce sales were in North America and the remainder were in European and
other international markets. The core of Chiquita's Fresh Produce
operations is the marketing, distribution and sourcing of bananas. Sales of
bananas accounted for approximately two-thirds of Fresh Produce net sales in
each of the last three years.
Chiquita believes it derives competitive benefits in the marketing,
distribution and sourcing of fresh produce through:
* recognized brand names and a reputation for quality;
* strong market positions in North America and Europe, its
principal markets;
- K-1 -
* a modern, cost-efficient fresh fruit transportation system;
* an industry leading position in terms of number and
geographic diversity of major sources of bananas;
* state-of-the-art banana ripening techniques; and
* best-demonstrated agricultural practices.
These characteristics enhance Chiquita's ability to provide customers with
premium quality products on a consistent basis.
DISTRIBUTION AND MARKETING. Chiquita sells and distributes a variety of
quality fruit and vegetable products through a network of fresh produce
operations in North America, Europe and the Pacific Rim. Some of these
operations involve the production, distribution and marketing of fresh fruits
and vegetables while others involve only distribution and marketing. The
Company has regional sales organizations and utilizes commissioned agents to
sell to retail customers and wholesalers. The retail customers include large
chain stores with which Chiquita enters into supply contracts, typically for a
one year term.
Bananas are sold under the "Chiquita," "Chiquita Jr.," "Consul" and
"Amigo" brand names. Other fresh fruits are also sold under the "Chiquita"
and other brand names and include apples, apricots, berries, cherries, grapes,
peaches, pears, plums and tomatoes. Fresh vegetables, such as asparagus,
beans, broccoli, carrots, celery, cucumbers, lettuce, mushrooms, onions,
peppers and potatoes, are sold under the "Premium" and other brand names.
Fresh produce is highly perishable and must be brought to market and sold
generally within 30 to 60 days after harvest. Some items, such as lettuce and
berries, must be sold more quickly, while other items, such as apples and
pears, can be held in cold storage for longer periods of time.
The selling price received for each type of fruit or vegetable depends on
several factors, including:
* the availability and quality of the produce item in the
market; and
* the availability and quality of competing types of produce.
For example, although banana production tends to be relatively stable
throughout the year, banana pricing is seasonal. This is because bananas
compete against other fresh fruit which generally comes to market beginning in
the summer. As a result, banana prices are typically higher during the first
half of the year.
Adverse weather may restrict the availability of fresh produce
and result in increased prices. However, competing producers and distributors
may be affected differently, depending upon their ability and the cost to
obtain alternate supplies.
Bananas are distributed and marketed internationally in a highly
competitive environment. While smaller companies, including growers'
cooperatives, are a competitive factor, Chiquita's primary competitors are a
limited number of other international banana importers and exporters. To
compete successfully, Chiquita must be able to source bananas of uniformly
high quality and, on a timely basis, transport and distribute them to
worldwide markets. Chiquita sells approximately one-fourth of all bananas
imported into each of North America and Europe, its principal markets.
- K-2 -
Chiquita sources fresh fruit from Central and South America for
international distribution in order to increase the year-round availability of
certain types of seasonal produce. In other instances, the sourcing and
distribution of fresh produce is more regionalized. Typically in these
regional markets, no single competitor has a dominant market share.
To control quality, bananas are normally ripened under
controlled conditions. Most other types of fresh produce are already ripe
when shipped or ripen naturally. The Company sells some bananas ripened in
its own facilities or under contractual ripening arrangements. Chiquita also
provides advice and technical assistance to customers who purchase unripened
bananas. Chiquita generally obtains a premium price for its bananas due to
its reputation for quality and its innovative ripening and marketing
techniques, which include providing retail marketing support services to its
customers.
LOGISTICS. Transportation costs are significant in Chiquita's Fresh
Produce business. Oil is an important component of transportation costs.
Fresh produce distributed internationally is transported primarily by ocean-
going vessels. Chiquita ships its tropical fruit in refrigerated vessels
owned or chartered by the Company. All of Chiquita's tropical fruit shipments
into the North American market are delivered using pallets or containers.
This minimizes damage to the product by eliminating the need to handle
individual boxes. Chiquita owns or controls under long-term lease
approximately 75% of its aggregate shipping capacity. The remaining capacity
is operated under contractual arrangements having terms of approximately one
year. (See also ITEM 2 PROPERTIES and Notes 4 and 5 to the Consolidated
Financial Statements included in the Company's 1999 Annual Report to
Shareholders.)
Chiquita operates loading and unloading facilities which it owns or
leases in Central and South America and various ports of destination.
Chiquita generally uses common carriers and trucks owned or leased by the
Company to transport fresh produce to and from these ports as well as fresh
produce grown near its intended market.
SOURCING. Chiquita has a greater number and geographic diversity of
major sources of bananas than any of its competitors. During 1999,
approximately one-fourth of all bananas sold by Chiquita were sourced from
each of Costa Rica and Panama. Bananas are also sourced from numerous other
countries. Colombia, Ecuador, Guatemala and the Philippines each produced
between 7% and 15% (depending on the country) of the bananas sold by Chiquita
during 1999. As described below, Chiquita's banana production for 1999 was
significantly reduced in Guatemala and virtually eliminated in Honduras as a
result of Hurricane Mitch. The Company met its banana volume requirements in
1999 through improved productivity in its other farm divisions and through
purchases of fruit from other growers. Rehabilitated farms in Guatemala and
Honduras are expected to return to full production in the first half of 2000.
In 1999, approximately 45% of bananas sourced by Chiquita were produced
by subsidiaries and the remainder were purchased under fruit supply
arrangements from other growers. Generally, these arrangements require less
initial capital investment by the Company than owned production facilities.
Under some of these fruit supply arrangements, Chiquita furnishes financial
and technical assistance to its suppliers to support the production and
preparation of bananas for shipment. Approximately 14% of the bananas sold by
Chiquita in 1999 were purchased from one supplier in Ecuador. No other single
supplier provided more than 10% of Chiquita's bananas.
The most significant cost in the production of bananas is
labor, which varies depending on the country of origin. Since bananas are
packed in cardboard boxes for shipment, paper cost is also significant.
- K-3 -
In addition to its extensive production of bananas, Chiquita produces
mushrooms and berries in Australia, grapefruit in Florida and apples and
grapes in Chile. However, the majority of other fresh produce marketed by
Chiquita is purchased from numerous geographically diverse producers and
importers. Some of these production operations and purchase arrangements
involve joint ventures. Other arrangements involve formal long-term purchase
contracts or informal market trading with unrelated suppliers. Under these
arrangements, Chiquita may provide financial assistance. None of these
arrangements accounts for more than 5% of the Company's consolidated net
sales.
Fresh produce is vulnerable to adverse weather conditions including
windstorms, floods, drought and temperature extremes, which are quite common
but difficult to predict. Fresh produce is also vulnerable to crop disease
and pests. These factors may result in lower sales volume and increased
costs, but may also restrict supplies and lead to an increase in prices for
fresh produce. In addition, production may be affected by political changes
in countries where fruits and vegetables are grown. However, competitors may
be affected differently, depending upon their ability and the cost to obtain
adequate supplies from sources in other geographic areas. Chiquita's overall
risk from these factors is reduced by the geographic diversity of its
producing locations.
In late October and early November of 1998, Chiquita sustained
significant damage to its operations in Honduras and Guatemala as a result of
widespread flooding caused by Hurricane Mitch. Nearly all of the banana
plantings on the Company's 17,000 acres of cultivations in Honduras were
destroyed; approximately two-thirds of the plantings on the Company's 8,000
acres of cultivations in Guatemala were destroyed or severely damaged. The
Company has rehabilitated approximately half of the affected acreage in
Honduras and substantially all affected acreage in Guatemala.
Processed Foods
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Chiquita's Processed Foods include:
* private-label and branded canned vegetables sold in North America and
abroad;
* fruit and vegetable juices and beverages sold in North
America and Europe;
* processed bananas sold primarily in North America, Europe and the Far
East under the "Chiquita" brand; and
* other consumer products (primarily edible oils) sold in
Honduras under the "Numar" and other brand names.
Processed Foods sales, as a percent of consolidated net sales, amounted
to 20% in 1999, 18% in 1998 and 10% in 1997. This business has expanded since
1996 through acquisitions of vegetable canning companies. Sales of canned
vegetables accounted for 80% of Processed Foods net sales in 1999, 81% in 1998
and 63% in 1997.
Chiquita's vegetable canning operations are conducted by its subsidiary,
Chiquita Processed Foods, L.L.C. ("CPF"). CPF operates 20 processing
facilities in the upper Midwest and Northwest and markets a full line of over
25 types of processed vegetables, including corn, green beans, peas, pumpkin,
root vegetables and other related products, to retail and food service
customers throughout the U.S. and in over 40 other countries. Corn is CPF's
leading canned vegetable product, accounting for approximately 30% of
Processed Foods net sales. CPF enjoys the largest share of the U.S. private-
label canned vegetable business. It also sells branded products under the
"Stokely's," "Read" and other labels. CPF competes directly with a few major
producers of both branded and private-label canned vegetables, as well as
indirectly with numerous marketers of frozen and fresh vegetable products.
- K-4 -
Operating results for CPF are dependent on product availability and
market prices. Market prices tend to decrease as more product is available
and increase when product is scarce. The availability of vegetables for
canning is a direct result of planting acreage, weather and growing conditions
and crop yields. Favorable growing conditions increase both crop size and crop
quality.
Prior to each growing season, CPF enters into fixed-price supply
agreements with growers to purchase the vegetables to be processed in its
canning facilities. These supply agreements are typically for one year. To
ensure the quality and freshness of the vegetables used in its products, CPF:
* selects growers located near its canning facilities;
* requires growers to use seed selected by CPF; and
* controls the harvest process and its timing.
CPF's products are shipped to customers primarily via truck or rail. CPF
ships to its customers both directly from its plants and from regional storage
and distribution centers. This maximizes customer service and efficiency.
Sales of canned vegetables are not highly seasonal, although some
products, such as canned pumpkin, have higher sales volume in certain months.
Since the availability of vegetables for canning is predominantly seasonal,
the production of canned vegetables is also seasonal. As a result, CPF
requires a higher level of working capital to meet production requirements
during these periods.
The Company sells "Chiquita" branded fruit juices and beverages in North
America and Europe. These include a full line of tropical blends which are
manufactured by others to Chiquita's specifications and sold in shelf-stable
servings through club stores and mass merchandisers. In addition, a national
fruit juice producer produces and sells refrigerated and frozen juice products
in the United States using the "Chiquita" brand name and pays Chiquita a
license fee. In the western United States, the Company also produces and
markets natural fresh fruit and vegetable juices sold under the "Ferraro's
Earth Juice" and "Naked Juice" brand names; the Company has recently signed
an agreement to sell this business. The Company's juice products compete
with a wide variety of beverages in the highly competitive commercial
beverages industry, which includes other regional and national producers of
juice and juice drink products.
Chiquita's processed banana products include banana puree, frozen banana
pieces, sliced bananas and other specialty products. These products are sold
to producers of baby food, fruit beverages, baked goods and fruit-based
products, to wholesalers of bakery and dairy food products, and to selected
licensees including Beech-Nut and General Mills. Chiquita produces these
products in processing facilities in Costa Rica and through an Ecuadorian
joint venture formed in late 1999. The joint venture replaces the Company's
processed banana facility in Honduras, which had suffered significant damage
caused by Hurricane Mitch. This joint venture will produce a broader range of
processed fruit products, including pineapples and mangoes. Although Chiquita
enjoys the largest share of the worldwide processed banana market, this
industry remains highly competitive due to the existence of numerous other
producers with available processing capacity, including other banana growers,
fruit ingredients companies and large, international food companies.
The Company's consumer products operations in Honduras are conducted
through a 50%-owned joint venture. The joint venture produces and sells its
edible oil and other products under the "Numar," "Clover" and other brand
names. It competes principally with a number of small local firms and
subsidiaries of multinational corporations.
- K-5 -
RISKS OF INTERNATIONAL OPERATIONS
---------------------------------
The Company conducts operations in many foreign countries. Information
about the Company's operations by geographic area is in Note 13 to the
Consolidated Financial Statements included in the Company's 1999 Annual Report
to Shareholders and is incorporated herein by reference. These operations are
subject to a variety of risks inherent in doing business in those countries.
In 1993, the European Union implemented a regulatory system
governing the importation of bananas into the EU. By restricting the volume
of Latin American bananas imported into the EU, this quota system had the
effect of significantly decreasing the Company's overall volume and market
share in Europe. The quota regime is administered through a licensing system
and grants preferred status to producers and importers within the EU and its
former colonies, while imposing restrictive quotas, licenses and tariffs on
bananas imported from other sources, including Latin America, Chiquita's
primary source of fruit. Following imposition of the EU quota regime, prices
within the EU increased and have remained at a higher level than the levels
prevailing prior to the quota. Banana prices in other worldwide markets,
however, declined as the displaced EU volume entered those markets, and have
remained lower than in years prior to the EU quota.
The EU quota regime has been determined to be in violation of a number of
international trade obligations by both the World Trade Organization ("WTO")
and its predecessor, the General Agreement on Tariffs and Trade ("GATT"). See
"Management's Analysis of Operations and Financial Condition" included in the
Company's 1999 Annual Report to Shareholders for a chronology summarizing key
developments since the quota regime was implemented.
The EU continues to discuss numerous proposals to reform the EU banana
import regime. There can be no assurance as to the nature, extent or timing
of actions that may be taken by the EU or any other affected countries, nor as
to their impact on the EU banana import regulation or on the Company's
business.
The Company's operations are heavily dependent upon products grown and
purchased in Central and South American countries; at the same time,
Chiquita's operations are a significant factor in the economies of many of
these countries. These activities are subject to risks that are inherent in
operating in these countries, including government regulation, currency
restrictions and other restraints, risks of expropriation and burdensome
taxes. There is also a risk that legal or regulatory requirements will be
changed or that administrative policies will change.
The Company's operations in some Central and South American countries
are dependent upon leases and other agreements with the governments of these
countries. Chiquita leases all the land it uses in Panama from the Republic
of Panama. There are two leases, one for land on the Caribbean coast and the
other for land on the Pacific coast. The leases each have an initial term of
20 years expiring at the end of 2017, with consecutive 12-year extension
periods. Either lease can be canceled by Chiquita at any time on three
years' prior notice; the Republic of Panama has the right not to renew
either lease at the end of the initial term or any extension period, provided
that it gives four years' prior notice.
The Company's worldwide operations and products are subject to numerous
governmental regulations and inspections by environmental, food safety and
health authorities, including those relating to the use and disposal of
agrichemicals. These regulations directly affect day-to-day operations. The
Company believes it is substantially in compliance with applicable
regulations. However, actions by regulators in the past have required, and in
the future may require, operational modifications or capital improvements at
various locations. In addition, if violations occur, regulators can impose
fines, penalties and other sanctions, and the Company may be subject to
private lawsuits alleging personal injury or property damage.
- K-6 -
The Company's operations involve transactions in a variety of currencies.
Accordingly, its operating results may be significantly affected by
fluctuations in currency exchange rates. These fluctuations affect Chiquita's
operations because many of its costs are incurred in currencies different from
those received from the sale of its products. In addition, there is normally
a time lag between the incurrence of production costs and collection of the
related sales proceeds. The Company's policy is to exchange local currencies
for dollars immediately upon receipt, thus reducing exchange risk. The
Company also engages in various hedging activities to further reduce potential
losses on cash flows originating in currencies other than the U.S. dollar.
For information with respect to currency exchange, see Notes 1 and 7 to the
Consolidated Financial Statements and "Management's Analysis of Operations and
Financial Condition" included in the Company's 1999 Annual Report to
Shareholders.
LABOR RELATIONS
-----------------
The Company employs approximately 36,000 associates. Approximately
26,000 of these associates are employed in Central and South America,
including 20,000 workers covered by 51 labor contracts. Contracts covering
approximately 7,000 employees are currently being renegotiated or expire in
2000. The number of employees at the Company's vegetable canning subsidiary
increases from approximately 2,300 to 4,600 during peak production times.
Approximately 600 of these employees are covered by labor contracts.
Strikes or other labor-related actions are sometimes encountered upon
expiration of labor contracts or during the term of the contracts.
ITEM 2 - PROPERTIES
- -------------------
The Company owns approximately 85,000 acres and leases approximately
45,000 acres of improved land, principally in Colombia, Costa Rica, Honduras
and Panama. This land is primarily used for the cultivation of bananas and
support activities, including the maintenance of floodways. The Company also
owns warehouses, power plants, packing stations, irrigation systems and
loading and unloading facilities used in connection with its Fresh Produce
operations.
The Company owns or controls under long-term bareboat charters 16
refrigerated vessels and has 6 additional vessels under time charters,
primarily for transporting tropical fruit sold by Chiquita. From time to
time, excess capacity may be utilized by transporting cargo for third parties
or by chartering or subchartering vessels to other shippers. In addition, the
Company enters into spot charters and contracts of affreightment as necessary
to supplement its transportation resources. Chiquita also owns or leases
other related equipment, including refrigerated container units, used to
transport fresh produce. The owned ships are pledged as collateral for
related financings.
Properties used by the Company's Processed Foods operations include a
total of 20 vegetable canning facilities in Idaho, Illinois, Iowa, Michigan,
Minnesota, Oregon, Washington and Wisconsin, fruit processing facilities in
Costa Rica and Ecuador, and edible oil processing facilities in Honduras. All
of these facilities are owned, with the exception of the facilities in Ecuador
and Honduras which are owned and operated by joint ventures. In addition,
certain machinery and equipment owned by the Company's vegetable canning
subsidiary is pledged as collateral for its credit facility.
Other operating units of the Company own, lease and operate properties,
principally in the United States, Europe, Central and South America, and
Australia. The Company leases the space for its headquarters in Cincinnati,
Ohio.
- K-7 -
The Company believes its property and equipment are generally well
maintained, in good operating condition and adequate for its present needs.
The Company typically insures its assets against standard risks with third
party insurers, with the exception of banana cultivations in Central and
South America. The Company self-insures its banana cultivations because of
the high total cost of insurance from third parties and the geographic
diversity of its banana sources.
For further information with respect to the Company's physical
properties, see the descriptions under ITEM 1-BUSINESS-GENERAL above, and
Notes 4 and 5 to the Consolidated Financial Statements included in the
Company's 1999 Annual Report to Shareholders.
ITEM 3 - LEGAL PROCEEDINGS
- ----------------------------
A number of legal actions are pending against the Company. Based on
information currently available to the Company and on advice of counsel,
management does not believe this litigation will, individually or in the
aggregate, have a material adverse effect on the financial statements of
the Company.
On May 3, 1998, a Cincinnati, Ohio newspaper published accounts
describing alleged improper environmental and business practices by the
Company in certain of its operations in Central and South America. The
newspaper reported that one of its sources had previously provided to the SEC
information furnished to the newspaper. In late June 1998, the newspaper
renounced the series of articles as containing untrue accusations and
conclusions and creating a false and misleading impression of Chiquita's
business practices.
In April 1998, the Company was notified that it is the subject of a
confidential investigation by the SEC seeking to determine whether the Company
has complied with certain provisions of the Securities Exchange Act of 1934
(the "Exchange Act"), including provisions of the Foreign Corrupt Practices
Act (the "FCPA"). The investigation seeks to determine whether the Company,
with respect to certain operations in Central and South America, has complied
with FCPA provisions relating to the making or offering of illegal payments to
foreign officials and the maintenance of fair and accurate books, records and
accounts and an appropriate system of internal accounting controls or has
complied with Exchange Act provisions relating to the making, or filing with
the SEC of reports containing, untrue statements of material fact or omissions
of material fact. Although it is not in a position to predict the outcome of
this investigation, the Company believes that it has not violated the Exchange
Act or the FCPA and is cooperating with the investigation.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
- K-8 -
EXECUTIVE OFFICERS OF THE REGISTRANT
- -------------------------------------
Carl H. Lindner (age 80) - Mr. Lindner has been Chairman of
the Board and Chief Executive Officer of the Company since 1984.
He is also Chairman of the Board and Chief Executive Officer of American
Financial Group, Inc. ("AFG") which, through its subsidiaries, is engaged
primarily in property and casualty insurance businesses and in the sale of
annuities and life insurance. For more than 40 years, Mr. Lindner has been
Chairman of the Board and Chief Executive Officer of American Financial
Corporation ("AFC"), which became an AFG subsidiary in 1995.
Keith E. Lindner (age 40) - Mr. Lindner has been Vice Chairman
of the Board since 1997 and was President and Chief Operating Officer of the
Company from 1989 to 1997. He has served the Company in various executive
capacities since 1984. Mr. Lindner is also CoPresident and a Director of AFG
and AFC.
Steven G. Warshaw (age 46) - Mr. Warshaw has been President
and Chief Operating Officer and a Director of the Company since 1997. He
served as Chief Financial Officer from 1994 to 1998, and as Executive Vice
President and Chief Administrative Officer of the Company from 1990 to 1997.
Mr. Warshaw has served the Company in
various capacities since 1986.
Peter A. Horekens (age 51) - Mr. Horekens was appointed President and
Chief Operating Officer of the Company's Chiquita Fresh Group - Europe in
March 2000. He was President and Chief Operating Officer of the Company's
Chiquita Banana Group - Europe from 1997 to 2000. Mr. Horekens had previously
been employed by Kellogg Company, a multi-national food company, for over five
years, most recently as Vice President and Director of Asian Operations.
Robert F. Kistinger (age 47) - Mr. Kistinger was appointed President and
Chief Operating Officer of the Company's Chiquita Fresh Group in March 2000.
He was President and Chief Operating Officer of the Company's Chiquita Banana
Group from 1997 to 2000 and Senior Executive Vice President of the Chiquita
Banana Group from 1994 to 1997. He has served the Company in various
capacities since 1980.
Warren J. Ligan (age 46) - Mr. Ligan has been Senior Vice President and
Chief Financial Officer since 1998. Mr. Ligan has served the Company in
various capacities since 1993, most recently as Vice President, Taxation.
Robert W. Olson (age 54) - Mr. Olson has been Senior Vice President,
General Counsel and Secretary of the Company since 1996. From 1995 to 1996, he
was the Company's Vice President, General Counsel and Secretary. From 1987 to
1995, he served as Senior Vice President, General Counsel and Secretary of
American Premier Underwriters, Inc. (formerly named The Penn Central
Corporation), an affiliate of AFG. He was Senior Vice President and Secretary
of AFG from April 1995 until he joined the Company.
William A. Tsacalis (age 56) - Mr. Tsacalis has been Vice President and
Controller of the Company since 1987. He was Controller from 1984 to 1987
and has served the Company in various capacities since 1980.
- K-9 -
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
- -----------------------------------------------------------------------
The Company's common stock is listed for trading on the New
York, Boston and Pacific Stock Exchanges under the symbol "CQB."
At March 15, 2000, there were 5,501 common shareholders of record. Price and
dividend information for the Company's common stock is in Note 16 to the
Consolidated Financial Statements included in the Company's 1999 Annual Report
to Shareholders. Restrictions on the Company's ability to declare and pay
dividends, and the suspension of its common stock dividend beginning in the
first quarter of 2000, are described in "Management's Analysis of Operations
and Financial Condition" and Note 8 to the Consolidated Financial Statements
included in the Company's 1999 Annual Report to Shareholders. The information
in Notes 8 and 16 described above is incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
- ---------------------------------
This information is included in the table entitled "Selected Financial
Data" on page 28 of the Company's 1999 Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------
This information is included under the caption "Management's Analysis of
Operations and Financial Condition" included on pages 3 through 7 of the
Company's 1999 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
- ----------------------------------------------------
This information is included under the caption "Management's Analysis of
Operations and Financial Condition - Market Risk Management" included on page
6 of the Company's 1999 Annual Report to Shareholders and is incorporated
herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
The Consolidated Financial Statements of Chiquita Brands International,
Inc. on pages 8 through 27 of the Company's 1999 Annual Report to
Shareholders, including "Quarterly Financial Data" in Note 16 to the
Consolidated Financial Statements, are incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
- --------------------------------------------------------
None.
- K-10 -
PART III
-----------
Except for information relating to the Company's executive officers
included in Part I of this report, the information required by the following
Items will be included in Chiquita's definitive Proxy Statement which will
be filed with the Securities and Exchange Commission in connection with the
2000 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------
ITEM 11 - EXECUTIVE COMPENSATION
- ----------------------------------
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
- --------------------------------------------------
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
PART IV
-------
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
- ------------------------------------------------------
(a) 1. FINANCIAL STATEMENTS. The following consolidated financial
statements of the Company and the Report of Independent Auditors are
included in the Company's 1999 Annual Report to Shareholders and are
incorporated by reference in Part II, Item 8:
<TABLE>
<CAPTION>
Page of
Annual Report
--------------
<S> <C>
Report of Independent Auditors 2
Consolidated Statement of Income for
1999, 1998 and 1997 8
Consolidated Balance Sheet at
December 31, 1999 and 1998 9
Consolidated Statement of Shareholders'
Equity for 1999, 1998 and 1997 10
Consolidated Statement of Cash Flow
for 1999, 1998 and 1997 11
Notes to Consolidated Financial Statements 12
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES. Financial Statement Schedules I -
Condensed Financial Information of Registrant and II - Allowance for
Doubtful Accounts Receivable are included on pages K-14 and K-15 and
page K-16, respectively, of this Annual Report on Form 10-K. All other
schedules are not required under the related instructions or are not
applicable.
3. EXHIBITS. See Index of Exhibits (pages K-18 and K-19) for a
listing of all exhibits to this Annual Report on Form 10-K.
(b) The Company has filed the following report on Form 8-K since
September 30, 1999:
February 7, 2000 - to file Amendment No. 4 and related agreements
to the Company's Credit Agreement dated December 31, 1996.
- K-11 -
SIGNATURES
-----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on March 27, 2000.
CHIQUITA BRANDS INTERNATIONAL, INC.
By /s/ Carl H. Lindner
-------------------------
Carl H. Lindner
Chairman of the Board and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated below on March 27, 2000:
/s/ Carl H. Lindner Chairman of the Board and
Carl H. Lindner Chief Executive Officer
/s/ Keith E. Lindner Vice Chairman of the Board
Keith E. Lindner
/s/ Steven G. Warshaw Director, President and
Steven G. Warshaw Chief Operating Officer
/s/ Fred J. Runk Director
Fred J. Runk
Jean Head Sisco* Director
Jean Head Sisco
William W. Verity* Director
William W. Verity
Oliver W. Waddell* Director
Oliver W. Waddell
- K-12 -
/s/ Warren J. Ligan Senior Vice President and
Warren J. Ligan Chief Financial Officer
/s/ William A. Tsacalis Vice President and Controller
William A. Tsacalis (Chief Accounting Officer)
* By /s/ William A. Tsacalis
Attorney-in-Fact**
** By authority of powers of attorney filed with this Annual Report
on Form 10-K.
- K-13 -
CHIQUITA BRANDS INTERNATIONAL, INC. - PARENT COMPANY ONLY
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(In thousands)
Condensed Balance Sheet
<TABLE>
<CAPTION>
December 31,
1999 1998
---------- ---------
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents $ 23,458 $ 24,967
Trade receivables, net 22,513 17,377
Other receivables, net 30,955 1,262
---------- ---------
Total current assets 76,926 43,606
Investments in and accounts
with subsidiaries 1,551,987 1,508,849
Other assets 31,046 46,586
---------- ---------
Total assets $1,659,959 $1,599,041
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes and loans payable $ - $ 49,000
Accounts payable and accrued liabilities 50,470 43,504
---------- ---------
Total current liabilities 50,470 92,504
Long-term debt 883,815 683,294
Accrued pension and other employee benefits 20,388 29,263
---------- ---------
Total liabilities 954,673 805,061
Shareholders' equity 705,286 793,980
---------- ---------
Total liabilities and shareholders'
equity $1,659,959 $1,599,041
</TABLE> ========== ==========
<TABLE>
<CAPTION>
Condensed Statement of Income
1999 1998 1997
--------- -------- ---------
<S> <C> <C> <C>
Net sales $507,254 $503,753 $500,713
Cost of sales (431,722) (438,222) (436,624)
Selling, general and
administrative (113,981) (97,600) (91,362)
Equity in earnings of subsidiaries 57,256 85,338 102,454
-------- -------- ---------
Operating income 18,807 53,269 75,181
Interest income 13,446 1,553 3,951
Interest expense (82,335) (71,614) (70,589)
Other income, net - 6,880 -
-------- -------- ---------
Income (loss) before income taxes (50,082) (9,912) 8,543
Income taxes (8,300) (8,500) (8,200)
-------- -------- ---------
Net income (loss) $(58,382) $(18,412) $ 343
======== ========= =========
</TABLE>
- K-14 -
CHIQUITA BRANDS INTERNATIONAL, INC. - PARENT COMPANY ONLY
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(In thousands)
Condensed Statement of Cash Flow
<TABLE>
<CAPTION>
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Cash flow from operations $(69,546) $(4,378) $(47,341)
--------- -------- --------
Investing
Capital contributions to
subsidiaries (41,865) - (434)
Acquisitions of businesses - (18,907) (21,600)
Other (5,261) 5,016 1,284
-------- -------- --------
Cash flow from investing (47,126) (13,891) (20,750)
-------- -------- --------
Financing
Debt transactions
Issuances of long-term debt 194,363 - -
Repayments of long-term debt - (4,909) (15,366)
Increase (decrease) in
notes and loans payable (49,000) 49,000 -
Stock transactions
Issuances of common stock 58 1,483 6,215
Dividends (30,258) (30,069) (28,327)
-------- -------- ---------
Cash flow from financing 115,163 15,505 (37,478)
-------- -------- ---------
Decrease in cash and equivalents (1,509) (2,764) (105,569)
Balance at beginning of year 24,967 27,731 133,300
-------- -------- ---------
Balance at end of year $23,458 $24,967 $27,731
======== ======== =========
</TABLE>
Notes to Condensed Financial Information
1.These condensed financial statements present the accounts of the Chiquita
Brands International, Inc. Parent Company only ("CBII"). For purposes of
these condensed financial statements, CBII's investments in its subsidiaries
are accounted for by the equity method.
2.For additional information regarding long-term debt and equity, see Notes 8
and 11 to the Consolidated Financial Statements included in the Company's
1999 Annual Report to Shareholders.
- K-15 -
CHIQUITA BRANDS INTERNATIONAL, INC.
SCHEDULE II - ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning
of period $10,603 $10,683 $ 9,832
-------- -------- --------
Additions:
Charged to costs
and expenses 3,418 2,401 3,049
-------- -------- --------
Deductions:
Write-offs 1,382 3,011 1,441
Other, net 425 (530) 757
-------- -------- --------
1,807 2,481 2,198
-------- -------- --------
Balance at end of period $12,214 $10,603 $10,683
======== ======== ========
</TABLE>
- K-16 -
CHIQUITA BRANDS INTERNATIONAL, INC.
Index of Exhibits
Exhibit
Number Description
- --------- -------------
*3(i) Second Restated Certificate of Incorporation, filed as
Exhibit 3(a) to Quarterly Report on Form 10-Q for the quarter ended June
30, 1994, as amended by: (1) the Certificate of Amendment establishing
the terms of the Series B Preferred Stock, filed as Exhibit 3(a) to
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996; (2)
the Second Certificate of Amendment establishing the terms of the Series
C Preference Stock, filed as Exhibit 3.1 to Current Report on Form 8-K
dated September 15, 1997; (3) the Third Certificate of Amendment
increasing the number of authorized shares and changing the title and
par value of the common stock, filed as Exhibit 4 to Amendment No. 1 to
Form 8-A dated June 18, 1998; and (4) the Fourth Certificate of
Amendment reducing the number of shares designated as Series C
Preference Stock, filed as Exhibit 5 to Amendment No. 1 to Form 8-A
dated June 18, 1998
*3(ii)By-Laws, filed as Exhibit 3-b to Annual Report on Form 10-K
for the year ended December 31, 1992
*4 Indenture dated as of February 15, 1994 between the
Company and The Fifth Third Bank, Trustee, relating to the issuance of
Senior Debt Securities, filed as Exhibit 4(c) of Registration Statement
333-00789, as amended by: (1) the First Supplemental Indenture dated as
of June 15, 1994, filed as Exhibit 6(a)99(c) to Quarterly Report on Form
10-Q for the quarter ended June 30, 1994; (2) the Second Supplemental
Indenture dated as of July 15, 1996, filed as Exhibit 4 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996; and (3) the
Third Supplemental Indenture dated as of June 15, 1999, filed as Exhibit
4.2 to Amendment No. 1 to Form 8-A dated June 23, 1999. The Indenture
has been further supplemented by the terms of the following Senior Debt
Securities issued to date: (A) the Certificate of the Vice President and
Controller of the Company establishing the terms of the 9 1/8% Senior
Notes due 2004, filed as Exhibit 7(c)(3) to Current Report on Form 8-K
dated February 8, 1994; (B) the Terms of the 10 1/4% Senior Notes due
2006 approved by the Executive Committee of the Board of Directors of
the Company, filed as Exhibit 7(c)99.6 to Current Report on Form 8-K
dated July 22, 1996; and (C) the Certificate of Actions taken by the
President of the Company establishing the terms of the 10% Senior Notes
due 2009, filed as Exhibit 4.3 to Amendment No. 1 to Form 8-A dated June
23, 1999.
The Company has no other outstanding debt issues exceeding 10% of
its consolidated total assets. The Company will furnish to the
Securities and Exchange Commission, upon request, copies of all
agreements and instruments defining the rights of security holders for
debt issues not exceeding 10% of consolidated total assets.
*10-a Operating contracts dated February 18, 1998 between the
Republic of Panama and Chiriqui Land Company consisting of Contract of
Operations (Bocas del Toro), Contract of Operations (Armuelles),
Amendment and Extension of the Lease Land Contract, and related
documents as published in the Republic of Panama Official Gazette No.
23,485, filed as Exhibit 10-b to Annual Report on Form 10-K for the year
ended December 31, 1997
- K-18 -
*10-b Credit Agreement dated December 31, 1996 among
Chiquita Brands International, Inc., The First National Bank of Boston,
as administrative agent, and the financial institutions which are
lenders relating to the Company's $125 million revolving credit
facility, filed as Exhibit 10-d to Annual Report on Form 10-K for the
year ended December 31, 1996, as amended by: (1) Amendment No. 1 dated
as of December 8, 1997, filed as Exhibit 10-c to Annual Report on Form
10-K for the year ended December 31, 1997; (2) Amendment No. 2 dated as
of May 19, 1999 and Amendment No. 3 dated as of July 23, 1999, filed as
Exhibit 10 to Quarterly Report on Form 10Q for the quarter ended June
30, 1999; and (3) Amendment No. 4, and related pledge and security
agreements, dated as of February 7, 2000, filed as Exhibits 10.1, 10.2
and 10.3 to Current Report on Form 8-K dated February 7, 2000
*10-c Credit Agreement dated as of September 22, 1999
among Chiquita Processed Foods, L.L.C., First Union National Bank, as
administrative agent, and the financial institutions which are lenders,
relating to CPF's $200 million senior secured credit facility, filed as
Exhibit 10 to Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999
Executive Compensation Plans
-----------------------------
*10-d 1986 Stock Option and Incentive Plan, as Amended
and Restated effective May 13, 1998, filed as Exhibit 10-d to Annual
Report on Form 10-K for the year ended December 31, 1998
*10-e 1998 Stock Option and Incentive Plan, included as
Appendix A to the Company's definitive Proxy Statement filed on Schedule
14A dated April 8, 1998
*10-f 1997 Amended and Restated Deferred Compensation
Plan (conformed to include amendments effective January 1, 1998), filed
as Exhibit 10-f to Annual Report on Form 10-K for the year ended
December 31, 1998
*10-g 1997 Deferred Compensation Plan for the Board of
Directors (conformed to include amendments effective January 1, 1998),
filed as Exhibit 10-g to Annual Report on Form 10-K for the year ended
December 31, 1998
13 Chiquita Brands International, Inc. 1999 Annual Report to
Shareholders (pages 2 through 28)
21 Subsidiaries of Registrant
23 Consent of Independent Auditors
24 Powers of Attorney
27 Financial Data Schedule
---------------------------------------
* Incorporated by reference.
- K-19 -
EXHIBIT 13
----------
Statement of Management Responsibility
- --------------------------------------
The financial information presented in this Annual Report is
the responsibility of Chiquita Brands International, Inc.
management, which believes that it presents fairly the
Company's consolidated financial position and results of
operations in accordance with generally accepted accounting
principles.
The Company's system of internal accounting controls,
which is supported by formal financial and administrative
policies, is designed to provide reasonable assurance that
the financial records are reliable for preparation of
financial statements and that assets are safeguarded against
losses from unauthorized use or disposition. Management
reviews, modifies and improves these systems and controls as
changes occur in business conditions and operations. The
Company's worldwide internal audit function reviews the
adequacy and effectiveness of controls and compliance with
policies.
The Audit Committee of the Board of Directors, all of
whose members are independent directors, reviews the
Company's financial statements, accounting policies and
internal controls. In performing its reviews, the Committee
meets periodically with the independent auditors, management
and internal auditors to discuss these matters.
The Company engages Ernst & Young LLP, an independent
auditing firm, to audit its financial statements and express
an opinion thereon. The scope of the audit is set by Ernst
& Young LLP, which has full and free access to all Company
records and personnel in conducting its audits.
Representatives of Ernst & Young LLP are free to meet with
the Audit Committee, with or without members of management
present, to discuss their audit work and any other matters
they believe should be brought to the attention of the
Committee.
Report of Ernst & Young LLP, Independent Auditors
- -------------------------------------------------
The Board of Directors and Shareholders of Chiquita Brands
International, Inc.
We have audited the accompanying consolidated balance sheets
of Chiquita Brands International, Inc. as of December 31,
1999 and 1998, and the related consolidated statements of
income, shareholders' equity and cash flow for each of the
three years in the period ended December 31, 1999. These
financial statements, appearing on pages 8 through 27, are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States. Those
standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
consolidated financial position of Chiquita Brands
International, Inc. at December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flow for
each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
Cincinnati, Ohio
February 8, 2000
-2-
Chiquita Brands International, Inc.
MANAGEMENT'S ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
OPERATIONS
- -----------------------------------------------------------
This analysis of operations addresses Chiquita's operating
results shown in the Consolidated Statement of Income and
should be read in conjunction with the segment information
presented in Note 13 to the Consolidated Financial
Statements.
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- --------------------------------------------------------
<S> <C> <C> <C>
Net sales
Fresh Produce $2,044,788 $2,243,284 $2,198,939
Processed Foods 511,011 477,077 234,787
---------- ---------- ----------
$2,555,799 $2,720,361 $2,433,726
========== ========== ==========
Operating income
Fresh Produce $14,544 $53,085 $82,562
Processed Foods 27,494 25,524 17,604
---------- ---------- ----------
$42,038 $78,609 $100,166
========== ========== ==========
</TABLE>
Net sales in 1999 decreased 6% from the prior year
primarily as a result of lower banana pricing. In 1998, net
sales increased 12% over the prior year primarily as a
result of the expansion of Chiquita's Processed Foods
business through acquisitions of vegetable canning
operations in late 1997 and early 1998. (See Note 15 to the
Consolidated Financial Statements for additional discussion
of these acquisitions.)
Operating income in 1999 declined from 1998 in the
Company's Fresh Produce business. This decrease was
primarily due to weak banana pricing, particularly in Europe
as a result of the overallocation of European Union banana
import licenses early in the year and weakness in demand
from Eastern Europe and Russia. A stronger dollar in
relation to major European currencies (mitigated in part by
the Company's foreign currency hedging program) also
contributed to the lower earnings. These difficult industry
conditions adversely affected the last three quarters of
1999. In early 2000, the dollar has continued to
strengthen, especially in comparison to early 1999.
Chiquita's Processed Foods business showed improved earnings
in 1999 primarily as a result of higher pricing for canned
vegetables compared to the prior year.
In late 1999, the Company completed a workforce reduction
program that streamlined certain corporate and staff
functions in the U.S., Central America and Europe. The
program is expected to generate annual savings of $15 to $20
million. Operating income for 1999 includes a $9 million
charge representing severance, benefits extensions and
outplacement services provided by this program.
Operating income in 1998 includes write-downs and costs
of $74 million, net of minimum expected insurance
recoveries, as a result of significant damage in Honduras
and Guatemala caused by Hurricane Mitch. This includes
write-downs of banana cultivations and farm infrastructure
assets, and costs for employee benefits and humanitarian
aid. Excluding the effect of Hurricane Mitch, Fresh Produce
operating income in 1998 improved compared to 1997 primarily
as a result of lower delivered product costs for bananas as
the Company realized increased farm productivity and
transportation cost reductions on higher worldwide banana
volume. Acquisitions of vegetable canning operations in
late 1997 and early 1998 caused the increase in 1998
Processed Foods operating income as compared with 1997.
Interest income for 1999 includes $10 million related to
refunds to be received as a result of audits of the
Company's federal income tax returns for 1989 through 1991.
Interest expense in 1999 increased $3 million from 1998 and
1997 as a result of the Company's higher debt level.
-3-
The 1998 results also include write-offs of a non-
operating investment and of long-term production assets
which were offset by a gain from a cash settlement in excess
of $10 million for claims against a newspaper. The write-
off of production assets is included in "Cost of sales."
"Other income, net" includes the gain from the settlement of
claims against the newspaper and the non-operating
investment write-off.
Income taxes consist principally of foreign income taxes
currently paid or payable. No tax benefit was recorded for
unrealized U.S. net operating loss carryforwards or other
available tax credits.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Operating cash flow was $(6) million in 1999, $91 million in
1998 and $67 million in 1997. The decrease in 1999
operating cash flow resulted primarily from lower banana
pricing in the Company's Fresh Produce business. The
increase in 1998 operating cash flow compared to 1997 was
primarily due to Fresh Produce cost reductions.
Capital expenditures were $152 million in 1999, including
$74 million to rehabilitate banana farms in Honduras and
Guatemala which were destroyed or damaged by Hurricane Mitch
in late 1998. The Company funded its capital expenditures
with insurance proceeds related to Hurricane Mitch and
additional borrowings. An additional $20 million will be
spent on the rehabilitation of these farms, which are
expected to return to full production during the first half
of 2000. Remaining insurance proceeds of $32 to $42 million
are expected to be received in 2000.
Capital expenditures were $118 million in 1998 and $76
million in 1997. The 1998 amount includes $40 million for
expansion of Chiquita's vegetable canning operations and for
farm rehabilitation in the Company's western Panama division
following a two-month strike.
In June 1999, the Company issued $200 million principal
amount of 10% senior notes due 2009 for net proceeds of $195
million. The Company used most of these proceeds to repay
debt of subsidiaries and to repay borrowings under its
corporate revolving line of credit.
In September 1999, Chiquita Processed Foods, L.L.C.
("CPF"), the Company's vegetable canning subsidiary, entered
into a five-year $200 million senior secured credit
facility. The facility includes a $135 million revolving
credit line and a $65 million facility for term loans, and
replaces CPF's previous $85 million revolving credit
facility.
In February 2000, the Company amended its corporate
senior revolving credit facility. The amendment sets the
amount of the facility at $110 million, amends certain
covenants and pledges certain parent company assets as
security for its obligations. The facility is available
through January 2001.
At February 25, 2000, approximately $160 million of
borrowings were available to Chiquita and its subsidiaries
under committed lines of credit. At December 31, 1999, in
accordance with subsidiary loan agreements, approximately
$215 million of subsidiary net assets cannot be distributed
to the parent company in the form of dividends, loans or
advances. This restriction does not affect the parent
company's ability to meet its cash obligations.
In 2000, the Company expects its operating cash flow to
improve compared to 1999. In addition, until industry
conditions improve, the Company has suspended its common
stock dividend and currently plans to reduce recurring
capital expenditures to approximately one-half of annual
depreciation and amortization charges.
-4-
EUROPEAN UNION REGULATORY DEVELOPMENTS
- --------------------------------------
In 1993, the European Union ("EU") implemented a regulatory
system governing the importation of bananas into the EU. By
restricting the volume of Latin American bananas imported
into the EU, this quota system had the effect of
significantly decreasing the Company's overall volume and
market share in Europe. The quota regime is administered
through a licensing system and grants preferred status to
producers and importers within the EU and its former
colonies, while imposing restrictive quotas, licenses and
tariffs on bananas imported from other sources, including
Latin America, Chiquita's primary source of fruit.
Following imposition of the EU quota regime, prices within
the EU increased and have remained at a higher level than
the levels prevailing prior to the quota. Banana prices in
other worldwide markets, however, declined as the displaced
EU volume entered those markets, and have remained lower
than in years prior to the EU quota.
The EU quota regime has been determined to be and in
violation of a number of international trade obligations by
both the World Trade Organization ("WTO") and its
predecessor, the General Agreement on Tariffs and Trade
("GATT"). The following chronology summarizes key
developments:
1992, 1993 In two separate rulings, GATT panels find the
EU banana policies to be illegal.
1994 Chiquita makes a filing with the Office of the
U.S. Trade Representative ("USTR") under Section
301 of the U.S. Trade Act of 1974 (the "Trade
Act") charging that the EU quota and licensing
regime is unreasonable, discriminatory, and a
burden and restriction on U.S. commerce.
1995 The USTR determines that the EU regime violates
the Trade Act. Subsequently, the United States,
Guatemala, Honduras and Mexico commence a
challenge against the regime using the procedures
of the newly created WTO.
1996 Ecuador, the world's largest exporter of bananas,
joins these countries in the WTO action.
1997 A WTO panel rules that the EU banana regulation
violates numerous international trade obligations
to the detriment of Latin American supplying
countries and U.S. marketing firms such as
Chiquita. The WTO Appellate Body upholds the
panel's ruling.
1998 The EU adopts a revised quota and licensing regime
for implementation in January 1999. The five
governments that filed the WTO complaint, joined
by Panama, which became a WTO member after the
initial complaint was filed, oppose the revised EU
regime for not complying with the WTO rulings.
1999 In January, the United States requests WTO
authorization to impose punitive duties on
selected EU products exported to the United States
in retaliation for the harm to the United States
caused by the failure of the revised EU banana
regime to be WTO consistent.
In April, a WTO arbitration panel rules that the
revised EU banana import regime continues the same
discrimination against the United States and Latin
America which previous WTO rulings found to be in
violation of the EU's international trade
obligations. The WTO arbitrators conclude that the
United States is being harmed in the amount of
approximately $190 million annually and is
entitled to suspend EU trade concessions in that
amount. Accordingly, the United States imposes
prohibitive (100% of value) duties on selected EU
products accounting for $190 million of annual
exports to the United States. Shortly thereafter,
the EU indicates that it will modify its banana
import regime to be consistent with its
international trade obligations.
The EU continues to discuss numerous proposals to reform
the EU banana import regime. There can be no assurance as
to the nature, extent or timing of actions that may be taken
by the EU or any other affected countries, nor as to their
impact on the EU banana import regulation or on the
Company's business.
-5-
EU COMMON CURRENCY
- ------------------
In 1999, eleven European countries began implementation of
the EU common currency (the "euro") by accepting the euro as
legal tender in addition to their respective national
currencies. After July 1, 2002, the euro will be the sole
legal tender for these eleven countries. The Company's
affected customers continue to be invoiced in their
traditionally invoiced currencies. The Company is currently
addressing euro-related issues and their impact on
information systems, currency exchange rate risk and other
areas. Although the Company is not able to predict the full
implications of the euro implementation on its European
operations, the implementation has not had, and the Company
does not believe it will have, a material adverse effect on
its financial statements.
IMPACT OF YEAR 2000
- -------------------
Chiquita's company-wide Year 2000 Project was designed to
reduce the risk that the Year 2000 issue would cause
significant interruptions to the Company's operations. As a
result of the Project, the Company experienced no
significant problems affecting its business operations
related to the Year 2000 issue. The Company does not expect
any future problems arising from Year 2000 issues that would
have a material impact on the Company's financial
statements. The total cost of the Project for systems that
were not replaced or upgraded in the normal course was less
than $10 million.
MARKET RISK MANAGEMENT
- ----------------------
Chiquita's products are distributed in more than 60
countries. Its international sales are made primarily
in U.S. dollars and major European currencies (see "EU
Common Currency"). The Company reduces currency
exchange risk from sales originating in currencies
other than the dollar by exchanging local currencies
for dollars promptly upon receipt. The Company further
reduces its exposure to exchange rate fluctuations by
purchasing foreign currency option contracts
(principally euro contracts) to hedge sales
denominated in foreign currencies.
Chiquita's interest rate risk arises primarily from
its debt. The Company reduces its exposure to
interest rate fluctuations on its long-term variable
rate debt by entering into interest rate swap
agreements to fix the amount of interest payments.
The foreign currency option contracts and interest
rate swap agreements are derivative financial
instruments that change in value in the opposite
direction of the underlying transactions being hedged.
Chiquita uses a value at risk ("VAR") model to
estimate the potential loss the Company could incur as
a result of adverse changes in foreign currency
exchange and interest rates, based on a 95% confidence
level, over a given period of time. The VAR
calculations do not consider the potential effect of
favorable changes in these rates or the offsetting
increase in the dollar realization of an underlying
foreign currency sale. Therefore, the VAR
calculations are not intended to represent actual
losses the Company expects to incur.
As of December 31, 1999 and 1998 and for the year
ended December 31, 1999, the Company estimates that
the fair value of foreign currency option contracts
would decline by less than $2 million over a one-day
period due to an adverse change in foreign currency
exchange rates. However, the Company expects that any
decline in the fair value of these contracts would
typically be offset by an increase in the dollar
realization of the underlying sales denominated in
foreign currencies.
As of December 31, 1999 and 1998 and for the year
ended December 31, 1999, the Company estimates that
the combined adverse change in fair value of its debt
and interest rate swaps would be less than $3 million
over a one-day period due to an unfavorable change in
interest rates.
(See Note 7 to the Consolidated Financial
Statements for additional discussion of the Company's
hedging activities.)
-6-
***************
This Annual Report contains certain information that may be
deemed to be "forward-looking statements" within the meaning
of the Private Securities Litigation Act of 1995. These
statements reflect management's current views and estimates
of future economic circumstances, industry conditions and
Company performance. They are subject to a number of
assumptions, risks and uncertainties, many of which are
beyond the control of Chiquita. The assumptions, risks and
uncertainties include product pricing, cost to purchase or
grow (and availability of) fresh produce and other raw
materials, currency exchange rate fluctuations, natural
disasters and unusual weather conditions, operating
efficiencies, labor relations, access to capital, actions of
governmental bodies, and other market and competitive
conditions. Actual results or developments may differ
materially from the expectations expressed or implied in the
forward-looking statements.
-7-
<TABLE>
<CAPTION>
Chiquita Brands International, Inc.
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except
per share amounts) 1999 1998 1997
- ----------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,555,799 $2,720,361 $2,433,726
---------- ---------- ----------
Operating expenses
Cost of sales 2,094,406 2,206,047 1,935,870
Selling, general and
administrative 328,467 343,227 311,568
Depreciation 90,888 92,478 86,122
---------- ---------- ----------
2,513,761 2,641,752 2,333,560
---------- ---------- ----------
Operating income 42,038 78,609 100,166
Interest income 19,574 12,866 16,540
Interest expense (112,033) (108,757) (108,913)
Other income, net 339 7,370 750
---------- ---------- ----------
Income (loss) before
income taxes (50,082) (9,912) 8,543
Income taxes (8,300) (8,500) (8,200)
---------- ---------- ----------
Net income (loss) $(58,382) $(18,412) $343
Less dividends on
preferred and
preference stock (17,102) (17,102) (16,949)
---------- ---------- ----------
Net loss attributed
to common shares $(75,484) $(35,514) $(16,606)
========== ========== ==========
Net loss per
common share -
basic and diluted $(1.15) $(.55) $(.29)
========== ========== ==========
See Notes to Consolidated Financial Statements.
</TABLE>
-8-
<TABLE>
<CAPTION>
Chiquita Brands International, Inc.
CONSOLIDATED BALANCE SHEET
December 31,
(In thousands, except share amounts) 1999 1998
- -----------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents $97,863 $88,906
Trade receivables, less allowances of
$12,214 and $10,603, respectively 209,741 201,574
Other receivables, net 151,457 128,293
Inventories 421,806 387,293
Other current assets 22,000 34,168
--------- ---------
Total current assets 902,867 840,234
Property, plant and equipment, net 1,177,823 1,122,847
Investments and other assets 333,257 356,228
Intangibles, net 182,180 189,824
---------- ----------
Total assets $2,596,127 $2,509,133
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes and loans payable $89,519 $131,768
Long-term debt due within one year 40,235 37,511
Accounts payable 217,327 217,266
Accrued liabilities 141,341 144,884
---------- ----------
Total current liabilities 488,422 531,429
Long-term debt of parent company 883,815 683,294
Long-term debt of subsidiaries 343,186 319,312
Accrued pension and other employee
benefits 68,162 90,382
Other liabilities 107,256 90,736
---------- ----------
Total liabilities 1,890,841 1,715,153
---------- ----------
Shareholders' equity
Preferred and preference stock 253,475 253,475
Common stock, $.01 par value
(65,921,791 and 65,447,875 shares
outstanding, respectively) 659 654
Capital surplus 761,079 755,660
Accumulated deficit (303,607) (214,967)
Accumulated other comprehensive loss (6,320) (842)
---------- ----------
Total shareholders' equity 705,286 793,980
---------- ----------
Total liabilities and
shareholders' equity $2,596,127 $2,509,133
========== ==========
See Notes to Consolidated Financial Statements.
</TABLE>
-9-
<TABLE>
<CAPTION>
Chiquita Brands International, Inc.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Accumulated
Preferred other com- Total
and prehensive share-
preference Common Capital Accumulated income holders'
(In thousands) stock stock surplus deficit (loss) equity
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1996 $249,256 $18,614 $591,667 $(138,502) $3,218 $724,253
-------
Net income - - - 343 - 343
Unrealized translation loss - - - - (6,626) (6,626)
-------
Comprehensive loss (6,283)
-------
Share issuances
Option exercises - 170 6,045 - - 6,215
Acquisitions of
businesses 3,983 1,528 67,258 - - 72,769
Other - 77 11,382 - - 11,459
Dividends
Common stock - - - (11,395) - (11,395)
Preferred and preference
stock - - - (16,932) - (16,932)
------- ------- -------- -------- ------- -------
DECEMBER 31, 1997 253,239 20,389 676,352 (166,486) (3,408) 780,086
-------
Net loss - - - (18,412) - (18,412)
Unrealized translation gain - - - - 2,566 2,566
-------
Comprehensive loss (15,846)
-------
Reduction in par value of
common stock - (19,777) 19,777 - - -
Share issuances
Option exercises - 1 1,482 - - 1,483
Acquisitions of
businesses 236 41 58,049 - - 58,326
Dividends
Common stock - - - (12,970) - (12,970)
Preferred and preference
stock - - - (17,099) - (17,099)
------- ------ ------- -------- ------- -------
DECEMBER 31, 1998 253,475 654 755,660 (214,967) (842) 793,980
-------
Net loss - - - (58,382) - (58,382)
Unrealized translation loss - - - - (5,478) (5,478)
-------
Comprehensive loss (63,860)
-------
Share issuances
Option exercises - 1 57 - - 58
Other - 4 5,362 - - 5,366
Dividends
Common stock - - - (13,156) - (13,156)
Preferred and
preference stock - - - (17,102) - (17,102)
-------- ------ -------- --------- ------- --------
DECEMBER 31, 1999 $253,475 $659 $761,079 $(303,607)$(6,320)$705,286
======== ====== ======== ========= ======= ========
See Notes to Consolidated Financial Statements.
</TABLE>
-10-
<TABLE>
<CAPTION>
Chiquita Brands International, Inc.
CONSOLIDATED STATEMENT OF CASH FLOW
(In thousands) 1999 1998 1997
- -------------------------------------------------------------
<S> <C> <C> <C>
CASH PROVIDED (USED) BY:
OPERATIONS
Net income (loss) $(58,382) $(18,412) $343
Depreciation and amortization 97,304 99,138 91,588
Write-downs of banana production
assets, net of expected
insurance recoveries - 43,400 -
Changes in current assets
and liabilities
Trade receivables (4,222) (19,089) (10,796)
Other receivables (6,085) (23,052) (2,020)
Inventories (16,789) 3,556 4,062
Other current assets 1,877 10,408 (3,776)
Accounts payable and accrued
liabilities (15,095) (15,359) (22,613)
Other (4,651) 10,620 10,155
-------- -------- --------
CASH FLOW FROM OPERATIONS (6,043) 91,210 66,943
-------- -------- --------
INVESTING
Capital expenditures (152,080) (118,250) (76,248)
Hurricane Mitch insurance
proceeds 32,500 - -
Acquisitions of businesses (21,619) (26,199) (14,819)
Long-term investments (11,531) (4,563) (8,475)
Proceeds from sales of property,
plant and equipment 14,903 2,371 6,494
Proceeds from sale of non-core
business - 18,249 -
Refundable deposits for container
equipment 9,745 (9,745) -
Other 4,266 7,096 (7,974)
-------- -------- --------
CASH FLOW FROM INVESTING (123,816) (131,041) (101,022)
-------- -------- --------
FINANCING
Debt transactions
Issuances of long-term debt 284,327 78,858 12,234
Repayments of long-term debt (68,389) (108,627) (98,034)
Increase (decrease) in notes
and loans payable (46,922) 61,390 (17,865)
Stock transactions
Issuances of common stock 58 1,483 6,215
Dividends (30,258) (30,069) (28,327)
-------- -------- --------
CASH FLOW FROM FINANCING 138,816 3,035 (125,777)
-------- -------- --------
Increase (decrease) in cash
and equivalents 8,957 (36,796) (159,856)
Balance at beginning of year 88,906 125,702 285,558
-------- -------- --------
Balance at end of year $97,863 $88,906 $125,702
======== ======== ========
See Notes to Consolidated Financial Statements.
</TABLE>
-11-
Chiquita Brands International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
- ---------------------------------------------------
American Financial Group, Inc. and its subsidiaries owned
approximately 36% of the outstanding common stock of Chiquita
Brands International, Inc. ("Chiquita" or the "Company") as of
December 31, 1999.
CONSOLIDATION - The consolidated financial statements include
the accounts of the Company and its majority-owned
subsidiaries. Intercompany balances and transactions have
been eliminated. Investments representing minority interests
are accounted for by the equity method when Chiquita has the
ability to exercise significant influence in the investees'
operations; otherwise, they are accounted for at cost.
USE OF ESTIMATES - The financial statements have been prepared
in conformity with accounting principles generally accepted in
the United States, which require management to make estimates
and assumptions that affect the amounts and disclosures
reported in the financial statements and accompanying notes.
CASH AND EQUIVALENTS - Cash and equivalents include cash and
highly liquid investments with a maturity when purchased of
three months or less.
INVENTORIES - Inventories are valued at the lower of cost or
market. Cost for growing crops and certain fresh produce
inventories is determined principally on the "last-in, first-
out" (LIFO) basis. Cost for other inventory categories is
determined on the "first-in, first-out" (FIFO) or average cost
basis.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment
are stated at cost and, except for land, are depreciated on a
straight-line basis over their estimated useful lives.
INTANGIBLES - Intangibles consist primarily of goodwill and
trademarks which are amortized over not more than 40 years.
Accumulated amortization was $60 million and $54 million at
December 31, 1999 and 1998, respectively. The carrying value
of intangibles is evaluated periodically in relation to the
operating performance and future undiscounted cash flows of
the underlying businesses.
REVENUE RECOGNITION - Revenue is recognized on sales of
products when the customer receives title to the goods,
generally upon delivery.
INCOME TAXES - Deferred income taxes are recognized at
currently enacted tax rates for temporary differences between
the financial reporting and income tax bases of assets and
liabilities. Deferred taxes are not provided on the
undistributed earnings of subsidiaries operating outside the
U.S. that have been or are intended to be permanently
reinvested.
FOREIGN EXCHANGE - Chiquita generally utilizes the U.S. dollar
as its functional currency. Net foreign exchange gains
(losses) of $(5) million in 1999, $6 million in 1998 and $(7)
million in 1997 are included in income.
The Company enters into foreign currency option contracts
to hedge transactions denominated in foreign currencies.
These option contracts are specifically designated as hedges
and offset the losses or gains from currency risk associated
with the hedged transactions. The Company does not enter into
option contracts for speculative purposes. Amounts paid for
options and any gains realized thereon are deferred until the
hedged transaction occurs.
EARNINGS PER SHARE - Basic earnings per share is calculated on
the basis of the weighted average number of shares of common
stock outstanding during the year reduced by nonvested
restricted shares. The assumed conversions to common stock of
the Company's 7% convertible subordinated debentures,
preferred and preference stock, stock options and other stock
awards are excluded from diluted earnings per share
computations for periods in which these items, on an
individual basis, have an anti-dilutive effect.
NEW ACCOUNTING PRONOUNCEMENTS - In 1998, the Financial
Accounting Standards Board issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." This
standard requires the recognition of all derivatives on the
balance sheet at fair value. Adoption of SFAS No. 133 is
required by January 1, 2001 and is currently under review by
the Company.
-12-
<TABLE>
<CAPTION>
Note 2 - Earnings Per Share
- ------------------------------------------------------------
Basic and diluted earnings per share are calculated as
follows:
(In thousands, except per
share amounts) 1999 1998 1997
- --------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) $(58,382) $(18,412) $343
Dividends on preferred and
preference stock (17,102) (17,102) (16,949)
-------- -------- --------
Net loss attributed to
common shares $(75,484) $(35,514) $(16,606)
======== ======== ========
Weighted average common
shares outstanding 65,768 64,734 57,185
Nonvested restricted shares - (71) (160)
-------- -------- --------
Shares used to calculate basic
and diluted earnings
per share 65,768 64,663 57,025
======== ======== ========
Basic and diluted net loss
per common share $(1.15) $(.55) $(.29)
======== ======== ========
</TABLE>
The assumed conversions to common stock of the Company's
preferred stock, preference stock and 7% convertible
subordinated debentures and the assumed exercise of
outstanding stock options and other stock awards would have
an anti-dilutive effect on diluted earnings per share and,
therefore, have not been included in the above calculations.
For additional information regarding the 7% convertible
subordinated debentures, stock options and other stock
awards and preferred and preference stock, see Notes 8, 10
and 11.
<TABLE>
<CAPTION>
Note 3 - Inventories
- -----------------------------------------------------------
Inventories consist of the following:
December 31,
(In thousands) 1999 1998
- ------------------------------------------------------------
<S> <C> <C>
Fresh produce $39,762 $43,052
Processed food products 215,365 184,438
Growing crops 104,699 109,891
Materials, supplies and other 61,980 49,912
-------- --------
$421,806 $387,293
======== ========
</TABLE>
The carrying value of inventories valued by the LIFO
method was $112 million at December 31, 1999 and $115
million at December 31, 1998. If these inventories were
stated at current costs, total inventories would have been
approximately $30 million and $33 million higher than
reported at December 31, 1999 and 1998, respectively.
-13-
<TABLE>
<CAPTION>
Note 4 - Property, Plant and Equipment
- -----------------------------------------------------------
Property, plant and equipment consist of the following:
Weighted
average
December 31,depreciable
(In thousands) 1999 1998 lives
- -----------------------------------------------------------
<S> <C> <C> <C>
Land $102,935 $104,212
Buildings and improvements 257,204 240,016 25 years
Machinery and equipment 473,335 439,600 10 years
Ships and containers 680,224 678,861 24 years
Cultivations 304,232 235,500 29 years
Other 74,799 70,672 19 years
---------- ----------
1,892,729 1,768,861
Accumulated depreciation (714,906) (646,014)
---------- ----------
$1,177,823 $1,122,847
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Note 5 - Leases
- ------------------------------------------------------------
Total rental expense consists of the following:
(In thousands) 1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Gross rentals
Ships and containers $96,101 $94,047 $79,746
Other 36,937 36,854 35,509
--------- --------- ---------
133,038 130,901 115,255
Less sublease rentals (16,095) (21,269) (14,359)
--------- --------- ---------
$116,943 $109,632 $100,896
========= ========= =========
</TABLE>
Future minimum rental payments required under operating
leases having initial or remaining non-cancelable lease
terms in excess of one year at December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
Ships and
(In thousands) containers Other Total
- -----------------------------------------------------------
<S> <C> <C> <C>
2000 $35,779 $20,507 $56,286
2001 21,933 16,862 38,795
2002 22,096 14,849 36,945
2003 17,382 13,034 30,416
2004 16,469 8,444 24,913
Later years 24,113 16,125 40,238
</TABLE>
Portions of the minimum rental payments for ships
constitute reimbursement for ship operating costs paid by
the lessor.
-14-
Note 6 - Equity Method Investments
- ------------------------------------------------------------
The Company has investments in a number of affiliates which
are accounted for by the equity method. These affiliates
are primarily engaged in the distribution of fresh produce.
Chiquita's share of the earnings of these affiliates was $5
million in 1999, $8 million in 1998 and $1 million in 1997,
and its investment in these companies totaled $121 million
at December 31, 1999 and $103 million at December 31, 1998.
The Company's share of undistributed earnings of these
affiliates totaled $28 million at December 31, 1999 and $23
million at December 31, 1998. The excess of the carrying
value of Chiquita's investment over its share of the fair
value of the investees' net assets at the date of
acquisition is being amortized over periods ranging from 10
to 40 years ($34 million and $31 million, net of accumulated
amortization, at December 31, 1999 and 1998, respectively).
Summarized unaudited financial information of these
affiliates follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- ------------------------------------------------------------
<S> <C> <C> <C>
Revenue $978,180 $707,358 $510,282
Gross profit 109,608 104,836 78,225
Net earnings 16,016 22,289 6,909
Current assets 205,270 174,110
Total assets 382,815 345,119
Current liabilities 164,596 116,773
Total liabilities 205,226 175,061
</TABLE>
Note 7 - Hedging
- --------------------------------------------------------------
Chiquita has interest rate swap agreements maturing in 2000
and 2001 which fix the rate of interest on approximately $14
million of its variable rate ship loans. At December 31,
1999, the Company had euro-denominated option contracts which
ensure conversion of approximately (euro) 200 million of sales
in 2000 at rates not lower than 1.04 dollars per euro or
higher than 1.18 dollars per euro.
The carrying values and estimated fair values of the
Company's debt, associated interest rate swap agreements and
foreign currency option contracts are summarized below:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------------- ---------------------
Carrying Estimated Carrying Estimated
(In thousands) value fair value value fair value
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt $(1,356,755)$(1,120,000)$(1,171,885)$(1,186,000)
Interest rate swap
agreements - (100) - (800)
Foreign currency option
contracts 2,980 8,400 5,890 (800)
</TABLE>
Fair values for the Company's publicly traded debt and
foreign currency option contracts are based on quoted market
prices. Fair value for other debt is estimated based on the
current rates offered to the Company for debt of similar
maturities. The fair values of interest rate swap
agreements are estimated based on the cost to terminate the
agreements.
The Company is exposed to credit risk in the event of
nonperformance by counterparties on interest rate swap
agreements. However, because the Company's hedging
activities are transacted only with highly rated
institutions, Chiquita does not anticipate nonperformance by
any of these counterparties. The amount of any credit
exposure is limited to unrealized gains on these agreements.
-15-
<TABLE>
<CAPTION
Note 8 - Debt
- ------------------------------------------------------------
Long-term debt consists of the following:
December 31,
(In thousands) 1999 1998
- ------------------------------------------------------------
<S> <C> <C>
PARENT COMPANY
9 1/8% senior notes, due 2004 $175,000 $175,000
9 5/8% senior notes, due 2004 247,771 247,341
10% senior notes, due 2009 200,000 -
10 1/4% senior notes, due 2006 149,034 148,943
7% subordinated debentures, due 2001 112,010 112,010
-------- --------
Long-term debt of parent company $883,815 $683,294
======== ========
SUBSIDIARIES
Loans secured by ships and containers,
due in installments from 2000 to 2009
- average effective interest rate of
8.6% (8.5% in 1998) $193,954 $221,546
Loan to Costa Rican farm subsidiaries,
due 2001
- variable interest rate of 9.2%
(7.8% in 1998) 55,000 55,000
Loan secured by vegetable canning assets,
due in installments from 2000 to 2004
- variable interest rate of 7.9% 50,000 -
Long-term portion of revolving credit
facility secured by vegetable canning
assets, due 2004
- variable interest rate of 7.7% 35,000 -
Foreign currency loans maturing through
2008
- average interest rate of 6%
(7% in 1998) 10,774 18,666
Other loans maturing through 2012
- average interest rate of 8%
(9% in 1998) 38,693 61,611
Less current maturities (40,235) (37,511)
-------- --------
Long-term debt of subsidiaries $343,186 $319,312
======== ========
</TABLE>
In June 1999, the Company issued $200 million principal
amount of 10% senior notes due 2009 for net proceeds of $195
million. The unsecured notes rank equally with existing and
future senior unsecured indebtedness of the Company. The
Company used most of these proceeds to repay borrowings
under its corporate revolving line of credit and to repay
debt of subsidiaries.
The 10% senior notes are callable beginning in 2004 at a
price of 105% of face value declining to face value in 2007.
The 10 1/4% senior notes are callable beginning in 2001 at a
price of 105 1/8% of face value declining to face value in
2004. The 7% subordinated debentures are callable at face
value and convertible into common stock at $43 per share.
At December 31, 1999, $75 million of loans secured by
ships, including $35 million of fixed rate ship debt
denominated in pounds sterling, had interest rates fixed at
an average of 8.3% by the terms of the loans or by the
operation of interest rate swap agreements (see Note 7).
-16-
Maturities on long-term debt during the next five years
are as follows:
<TABLE>
<CAPTION>
Parent
(In thousands) Company Subsidiaries Total
- -----------------------------------------------------------
<S> <C> <C> <C>
2000 $- $40,235 $40,235
2001 112,010 105,151 217,161
2002 - 41,377 41,377
2003 - 32,374 32,374
2004 425,000 85,664 510,664
</TABLE>
In 1999, Chiquita Processed Foods, L.L.C. ("CPF"), the
Company's vegetable canning subsidiary, entered into a five-
year $200 million senior secured credit facility. The
facility includes a $135 million revolving credit line and a
$65 million facility for term loans, and replaces CPF's
previous $85 million revolving credit facility. At December
31, 1999, $103 million of borrowings were outstanding under
the revolving credit line, of which $35 million is
classified as long-term debt, and a $50 million term loan
was outstanding. Borrowings under this facility are
collateralized by a security interest in CPF's receivables,
finished goods inventory and certain machinery and
equipment. Interest under the facility is based on, at the
Company's option, either the bank corporate base rate or
prevailing interbank Eurodollar offering rates. An annual
fee of up to 1/2% is payable on the unused portion of the
commitment. This facility contains covenants that limit
capital expenditures and the payment of dividends by CPF and
require CPF to maintain certain financial ratios related to
net worth and debt coverage.
In February 2000, the Company amended its corporate
senior revolving credit facility. The amendment sets the
amount of the facility at $110 million, amends certain
covenants and provides for the pledge of certain assets,
primarily the equity of CPF and parent company cash, as
security for the borrowings. The facility is available
through January 2001. Interest on borrowings under the
facility is based on, at the Company's option, the bank
corporate base rate, the federal funds effective rate or
prevailing interbank Eurodollar offering rates. An annual
fee of up to 3/4% is payable on the unused portion of the
facility. The credit facility contains covenants which
limit capital expenditures in 2000 to $75 million and
require the Company to satisfy certain ratios related to net
worth, senior debt-to-total capitalization and interest
coverage. At December 31, 1999, no amounts were outstanding
under the facility.
Certain of Chiquita's borrowing agreements restrict the
payment of cash dividends. Under Chiquita's amended
corporate senior revolving credit facility, dividend
payments are limited to $30 million in 2000.
At December 31, 1999, under the most restrictive convenants
of the Company's long-term debt agreements, approximately
$300 million was available for dividend payments.
The Company maintains various other lines of credit with
domestic and foreign banks for borrowing funds on a short-
term basis. The average interest rates for all short-term
notes and loans payable outstanding were 7.5% and 7.9% at
December 31, 1999 and 1998, respectively.
At December 31, 1999, in accordance with subsidiary loan
agreements, approximately $215 million of subsidiary net
assets cannot be distributed to the parent company in the
form of dividends, loans or advances.
Cash payments relating to interest expense were $105
million in 1999 and 1998 and $104 million in 1997.
-17-
Note 9 - Pension and Severance Benefits
- -----------------------------------------------------------
The Company and its subsidiaries have several defined
benefit and contribution pension plans covering
approximately 5,500 domestic and foreign employees.
Approximately 21,000 employees are covered by Central and
South American severance plans. Pension plans covering
eligible salaried employees and Central and South American
severance plans for all employees call for benefits to be
based upon years of service and compensation rates.
Pension and severance expense consists of the following:
<TABLE>
<CAPTION>
Foreign Plans
-----------------------------
(In thousands) 1999 1998 1997
- -------------------------------------------------------------------
<S> <C> <C> <C>
Defined benefit and severance plans:
Service cost $3,768 $5,070 $4,795
Interest on projected benefit obligation 5,122 6,070 5,835
Expected return on plan assets (139) (136) (89)
Recognized actuarial loss 368 757 299
Amortization of prior service cost
and transition obligation 525 1,556 1,239
------- ------- -------
9,644 13,317 12,079
Curtailment loss - 14,061 -
Settlement loss - 4,666 -
------- ------- -------
9,644 32,044 12,079
Defined contribution plans 604 768 654
------- ------- -------
Total pension and severance expense $10,248 $32,812 $12,733
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Domestic Plans
---------------------------
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------
<S> <C> <C> <C>
Defined benefit and severance plans:
Service cost $1,084 $1,057 $593
Interest on projected benefit obligation 3,034 2,838 2,561
Expected return on plan assets (3,424) (2,697) (2,441)
Recognized actuarial loss 317 365 501
Amortization of prior service cost
and transition obligation 109 91 62
------- ------- -------
1,120 1,654 1,276
Curtailment loss - - -
Settlement loss - - -
------- ------- -------
1,120 1,654 1,276
Defined contribution plans 4,786 3,726 3,234
------- ------- -------
Total pension and severance expense $5,906 $5,380 $4,510
======= ======= =======
</TABLE>
As a result of Hurricane Mitch, the Company recognized
curtailment and settlement losses in 1998 related to Central
American employee benefit plans.
The Company's pension and severance benefit obligations
relate primarily to Central and South American benefits
which, in accordance with local government regulations, are
generally not funded until benefits are paid. Domestic
pension plans are funded in accordance with the requirements
of the Employee Retirement Income Security Act. Plan assets
consist primarily of corporate debt securities, U.S.
Government and agency obligations and collective trust
funds.
-18-
Financial information with respect to the Company's
foreign and domestic defined benefit pension and severance
plans is as follows:
<TABLE>
<CAPTION>
Foreign Plans Domestic Plans
--------------- ----------------
(In thousands) 1999 1998 1999 1998
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fair value of plan assets at
beginning of year $3,028 $2,803 $41,653 $35,912
Actual return on plan assets 111 40 3,756 5,650
Employer contributions 21,596 28,080 2,679 2,374
Benefits paid (21,137) (27,895) (2,794) (2,451)
Other - - 154 168
-------- -------- ------- -------
Fair value of plan assets at
end of year $3,598 $3,028 $45,448 $41,653
======== ======== ======= =======
Projected benefit obligation at
beginning of year $64,856 $67,188 $43,414 $39,904
Service and interest cost 8,890 11,140 4,118 3,895
Actuarial (gain) loss (4,585) 409 (1,624) 1,456
Benefits paid (21,137) (27,895) (2,794) (2,451)
Curtailment - 12,515 - -
Settlement - 1,499 - -
Other - - 134 610
-------- -------- ------- -------
Projected benefit obligation
at end of year $48,024 $64,856 $43,248 $43,414
======== ======== ======= =======
Plan assets in excess of (less
than) projected benefit
obligation $(44,426) $(61,828) $2,200 $(1,761)
Unrecognized actuarial loss 4,925 10,401 3,334 5,682
Unrecognized prior service cost 1,077 1,229 285 494
Unrecognized transition obligation 172 543 436 518
Adjustment required to recognize
minimum pension liability - - (826) (3,099)
-------- -------- ------- -------
(38,252) (49,655) 5,429 1,834
Prepaid pension asset - - 6,423 5,064
-------- -------- ------- -------
Accrued pension liability $(38,252) $(49,655) $(994) $(3,230)
======== ======== ======= =======
</TABLE>
Included in the table above are plans whose benefit
obligation exceeds plan assets. These plans are primarily
foreign pension and severance plans that are generally not
required to be funded until benefits are paid. The
accumulated benefit obligation, projected benefit obligation
and fair value of assets of plans for which benefits exceed
assets were $59 million, $70 million and $21 million,
respectively, as of December 31, 1999 and $72 million, $88
million and $19 million, respectively, as of December 31,
1998.
The projected benefit obligations of Central and South
American pension and severance plans in 1999 and 1998 were
determined using discount rates of approximately 9 1/4%.
The assumed long-term rate of compensation increase was 6%
for both years. The projected benefit obligations of the
Company's domestic pension plans were determined using a
discount rate of approximately 7 1/2% in 1999 and 7 1/4% in
1998. The assumed long-term rate of compensation increase
was 5 1/2% in 1999 and 1998 and the assumed long-term rate
of return on plan assets was approximately 8% for both
years.
-19-
Note 10 - Stock Options
- ------------------------------------------------------------
Under its non-qualified stock option and incentive plans,
the Company may grant up to an aggregate of 25 million
shares of common stock in the form of stock options, stock
appreciation rights and stock awards. Under these plans,
options have been granted to directors, officers and other
key employees to purchase shares of the Company's common
stock at the fair market value at the date of grant. The
options generally vest over ten years and may be exercised
over a period not in excess of 20 years.
A summary of the Company's stock option activity and
related information follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- ------------- -------------
Weighted Weighted Weighted
average average average
(In thousands, except exercise exercise exercise
per share amounts) Shares price Shares price Shares price
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Under option at
beginning of year 9,479 $13.32 8,403 $13.44 6,893 $13.09
Options granted 2,875 8.90 1,858 12.92 2,539 14.08
Options exercised (6) 10.31 (123) 12.06 (509) 12.21
Options canceled or
expired (1,351) 11.92 (659) 13.86 (520) 13.15
------ ------ ------ ------ ------ ------
Under option at end
of year 10,997 $12.34 9,479 $13.32 8,403 $13.44
====== ====== ====== ====== ====== ======
Options exercisable at
end of year 4,926 $12.71 3,705 $13.30 2,943 $13.45
====== ====== ====== ====== ====== ======
Shares available for
future grants 9,482 11,041 2,536
====== ====== ======
</TABLE>
Options outstanding as of December 31, 1999 have exercise
prices ranging from $4.25 to $34.44 and a weighted average
remaining contractual life of 16 years. More than 90% of
these options have exercise prices in the range of $9.34 to
$15.69.
Under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," because the
exercise price of the Company's stock options equals the
market price of the underlying stock on the date of grant,
no compensation expense is recognized. SFAS No. 123,
"Accounting for Stock-Based Compensation," requires
disclosure of the estimated fair value of stock options
granted after 1994 and pro forma financial information
assuming compensation expense was recorded using these fair
values.
The estimated weighted average fair value per option
share granted is $3.66 for 1999, $5.24 for 1998 and $6.34
for 1997 using a Black-Scholes option pricing model with the
following assumptions: weighted average risk-free interest
rates of 5.0% for 1999, 5.6% for 1998 and 6.5% for 1997;
dividend yield of 1.5%; volatility factor for the Company's
common stock price of approximately 37%; and a weighted
average expected life of eight years for options not
forfeited. The estimated pro forma compensation expense
based on these option fair values would be approximately $5
million ($.07 per share) in 1999, $4 million ($.06 per
share) in 1998 and $3 million ($.05 per share) in 1997.
Because SFAS No. 123 applies only to options granted after
1994, the effect of applying this standard to current year
pro forma information is not necessarily indicative of the
effect in future years.
-20-
Note 11 - Shareholders' Equity
- ------------------------------------------------------------
At December 31, 1999, 200 million shares of common stock
were authorized, including unissued shares reserved for the
following purposes:
<TABLE>
<CAPTION>
<S> <C>
Issuance under stock option and employee
benefit plans 24 million
Conversion of 7% subordinated debentures 3 million
Conversion of preferred and preference stock 26 million
</TABLE>
In 1998, the Company's shareholders approved a change of
title and par value of the Company's Capital Stock, $.33 par
value, to Common Stock, $.01 par value.
In 1997, Chiquita issued 4,585,210 shares of common stock
and 79,659 shares of $2.50 Convertible Preference Stock,
Series C to the former owners of acquired canning companies.
In 1998, Chiquita issued 182,735 common shares and 4,712
shares of Series C preference stock as final payment for the
1997 acquisitions and issued 2,966,533 common shares in
connection with the 1998 acquisition of another canning
company. In 1998, Chiquita also issued 873,710 common
shares to acquire a fresh mushroom business. (See Note 15.)
At December 31, 1999, three series of preferred and
preference stock are outstanding, each share of which has a
liquidation preference of $50.00, and has an annual dividend
rate and is convertible at the holder's option into a number
of shares of Chiquita common stock as follows:
<TABLE>
<CAPTION>
Annual Holders'
Shares dividend conversion
outstanding rate rate
- ------------------------------------------------------------
<S> <C> <C> <C>
$2.875 Non-Voting Cumulative
Preferred Stock, Series A 2,875,000 $2.875 2.6316
$3.75 Convertible Preferred
Stock, Series B 2,300,000 3.750 3.3333
$2.50 Convertible Preference
Stock, Series C 84,371 2.500 2.9220
- -------------------------------------------------------------
</TABLE>
Through February 14, 2001, each Series A share is
convertible at the Company's option into 2.6316 shares of
common stock provided the market value of Chiquita common
stock exceeds $24.70 per share. Thereafter, each Series A
share is convertible at the Company's option into a number
of shares of common stock (not exceeding 10 shares) having a
total market value of $50.00.
Through September 9, 2000, each Series B share is
convertible at the Company's option into a number of shares
of common stock (not exceeding 10 shares) having a total
market value of $51.50 ($50.75 if converted on or after
September 10, 2000 and $50.00 if converted on or after
September 10, 2001). However, this conversion is permitted
only if the market value of Chiquita common stock exceeds
$7.00 per share when notice of the conversion is given.
Beginning on June 30, 2000, each Series C share is
convertible at the Company's option into a number of shares
of common stock (not exceeding 10 shares) having a total
market value of $51.50 ($50.75 if converted on or after June
30, 2001 and $50.00 if converted on or after June 30, 2002).
The Series A and Series B shares are non-voting. The
Series C shares have one vote per share, voting with the
common stock. In certain circumstances if the Company fails
to pay quarterly dividends on Series A, B and C shares, the
holders of such shares, voting as a class, have the right to
elect two directors in addition to the regular directors.
The Board of Directors has the authority to fix the terms of
4,825,000 additional shares of Non-Voting Cumulative
Preferred Stock and 3,915,629 additional shares of
Cumulative Preference Stock.
-21-
<TABLE>
<CAPTION>
Note 12 - Income Taxes
- -----------------------------------------------------------
Income taxes consist of the following:
(In thousands) U.S. Federal U.S. State Foreign Total
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Current tax expense $235 $1,161 $6,144 $7,540
Deferred tax expense - - 760 760
----- ------ ------ -------
$235 $1,161 $6,904 $8,300
===== ====== ====== =======
1998
Current tax expense $369 $1,100 $8,006 $9,475
Deferred tax benefit - - (975) (975)
----- ------ ------ -------
$369 $1,100 $7,031 $8,500
===== ====== ====== =======
1997
Current tax expense $375 $1,125 $6,076 $7,576
Deferred tax expense - - 624 624
----- ------ ------ -------
$375 $1,125 $6,700 $8,200
===== ====== ====== =======
</TABLE>
Income tax expense differs from income taxes computed
at the U.S. federal statutory rate for the following
reasons:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- -----------------------------------------------------------
<S> <C> <C> <C>
Income tax expense (benefit)
computed at U.S. federal
statutory rate $(17,529) $(3,469) $2,990
State income taxes, net of
federal benefit 755 715 731
U.S. losses for which no tax
benefit has been recognized - 20,734 13,723
Foreign tax differential 25,056 (8,816) (12,728)
Goodwill amortization 1,651 1,850 1,148
Other (1,633) (2,514) 2,336
------- ------- -------
Income tax expense $8,300 $8,500 $8,200
======= ======= =======
</TABLE>
-22-
Income (loss) before income taxes consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- -----------------------------------------------------------
<S> <C> <C> <C>
Subject to tax in:
United States $6,230 $(51,326) $(39,211)
Foreign jurisdictions (56,312) 41,414 47,754
--------- --------- ---------
$(50,082) $(9,912) $8,543
========= ========= =========
</TABLE>
The components of deferred income taxes included on the
balance sheet are as follows:
<TABLE>
<CAPTION>
December 31,
------------------
(In thousands) 1999 1998
- ---------------------------------------------------------
<S> <C> <C>
Deferred tax benefits
Employee benefits $26,434 $31,726
Accrued expenses 27,055 25,143
Other 20,651 24,631
--------- ---------
74,140 81,500
--------- ---------
Deferred tax liabilities
Depreciation and amortization (32,470) (25,452)
Growing crops (18,983) (19,601)
Long-term debt (2,525) (6,167)
Other (14,385) (7,227)
--------- ---------
(68,363) (58,447)
--------- ---------
5,777 23,053
Valuation allowance (8,142) (23,795)
--------- ---------
Net deferred tax liability $(2,365) $(742)
========= =========
</TABLE>
Net deferred taxes do not reflect the benefit that would
be available to the Company from the use of its U.S.
operating loss carryforwards of $303 million, capital loss
carryforwards of $43 million and alternative minimum tax
credits of $6 million. The operating loss carryforwards
expire from 2007 through 2019 and the capital loss
carryforwards expire from 2000 through 2002. Undistributed
earnings of foreign subsidiaries which have been, or are
intended to be, permanently reinvested in operating assets,
if remitted, are expected to result in little or no tax by
operation of relevant statutes and the carryforward
attributes described above. Cash payments for income taxes,
net of refunds, were $9 million in 1999, $7 million in 1998
and $5 million in 1997.
-23-
Note 13 - Segment Information
- -----------------------------------------------------------
The Company conducts business in two business segments,
organized primarily on a product line basis, with each
segment offering a variety of different but related
products. The Fresh Produce segment includes the
production, transportation, distribution and marketing of
Chiquita bananas and a wide variety of other fresh fruits
and vegetables. The Processed Foods segment consists of the
production, distribution and marketing of the Company's
private-label and branded canned vegetables, branded fruit
and vegetable juices and beverages, processed bananas and
edible oil based consumer products. The Company evaluates
the performance of its business segments based on operating
income before unusual items. Intercompany transactions
between segments are eliminated. Financial information for
each segment follows:
<TABLE>
<CAPTION>
Fresh Processed
Produce Foods Consolidated
- -------------------------------------------------------------------
<S> <C> <C> <C>
1999
Net sales $2,044,788 $511,011 $2,555,799
Operating income before
unusual items (1) 23,129 27,909 51,038
Depreciation and amortization 78,363 18,941 97,304
Income from equity investments 4,161 1,246 5,407
Total assets 2,079,903 516,224 2,596,127
Net operating assets (2) 1,533,397 430,781 1,964,178
Investment in equity affiliates 103,527 17,306 120,833
Expenditures for long-lived
assets 148,490 42,207 190,697
1998
Net sales $2,243,284 $477,077 $2,720,361
Operating income before
unusual items (1) 126,685 25,524 152,209
Depreciation and amortization 82,722 16,416 99,138
Income from equity investments 6,515 1,221 7,736
Total assets 2,055,854 453,279 2,509,133
Net operating assets (2) 1,512,185 364,774 1,876,959
Investment in equity affiliates 91,170 11,910 103,080
Expenditures for long-lived
assets 116,042 36,018 152,060
1997
Net sales $2,198,939 $234,787 $2,433,726
Operating income 82,562 17,604 100,166
Depreciation and amortization 84,562 7,026 91,588
Income from equity investments (245) 1,263 1,018
Total assets 2,083,080 318,533 2,401,613
Net operating assets (2) 1,517,076 251,844 1,768,920
Investment in equity affiliates 57,135 9,223 66,358
Expenditures for long-lived
assets 88,000 29,224 117,224
</TABLE>
(1)Operating income before unusual items excludes the
following: in 1999, $9 million of charges resulting from
a workforce reduction program; in 1998, write-downs and
costs totaling $74 million, net of the minimum of the
range of expected insurance recoveries of $60 to $75
million, resulting from significant damage in Honduras
and Guatemala caused by Hurricane Mitch.
(2)Net operating assets consist of total assets less (i)
cash and equivalents and (ii) total liabilities other
than debt.
-24-
Financial information by geographic area is as follows:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
United States $1,552,320 $1,558,973 $1,277,513
Central and South America 8,124 47,336 54,946
Europe and other international 995,355 1,114,052 1,101,267
---------- ---------- ----------
$2,555,799 $2,720,361 $2,433,726
========== ========== ==========
Long-lived assets
United States $427,542 $410,068 $341,815
Central and South America 532,504 507,641 534,836
Europe and other international 285,082 278,527 243,154
Shipping operations 448,132 472,663 498,342
---------- ---------- ----------
$1,693,260 $1,668,899 $1,618,147
========== ========== ==========
</TABLE>
The Company's products are sold throughout the world and
its principal production and processing operations are
conducted in Central and South America and the United
States. Chiquita's earnings are heavily dependent upon
products grown and purchased in Central and South America.
These activities, a significant factor in the economies of
the countries where Chiquita produces bananas and related
products, are subject to the risks that are inherent in
operating in such foreign countries, including government
regulation, currency restrictions and other restraints, risk
of expropriation and burdensome taxes. Certain of these
operations are substantially dependent upon leases and other
agreements with these governments.
The Company is also subject to a variety of government
regulations in certain countries where it markets bananas
and other products, including import quotas and tariffs,
currency exchange controls and taxes.
Note 14 - Litigation
- ------------------------------------------------------------
A number of legal actions are pending against the Company.
Based on information currently available to the Company and
advice of counsel, management does not believe such
litigation will, individually or in the aggregate, have a
material adverse effect on the financial statements of the
Company.
-25-
Note 15 - Acquisitions and Divestitures
- ------------------------------------------------------------
In April 1999, CPF acquired certain canning assets of
Agripac, Inc. The purchase price of approximately $20
million was funded with borrowings under CPF's revolving
credit facility.
In early 1998, Chiquita acquired Stokely USA, Inc.,
previously a publicly-owned vegetable canning business. In
connection with the acquisition, Chiquita issued $11 million
of common stock (.8 million shares) in exchange for all
outstanding Stokely shares, and issued $33 million of common
stock (2.2 million shares) and paid $18 million of cash to
retire corresponding amounts of Stokely debt.
Also during 1998, the Company acquired Campbell Soup
Company's Australian fresh mushroom business. In connection
with this acquisition, Chiquita issued $12 million (.9
million shares) of common stock and paid $5 million of cash
in exchange for all of the outstanding capital stock of this
business.
During 1997, the Company acquired separately the Owatonna
Canning group of companies and American Fine Foods, Inc.,
privately-owned companies engaged primarily in the vegetable
canning business. Chiquita issued $72 million (4.8 million
shares) of common stock, including $3 million (.2 million
shares) issued in 1998, and preference stock valued at $4
million (.1 million shares) to acquire these companies, and
paid $19 million to retire debt of the acquired businesses.
Each of these transactions was accounted for as a
purchase. The assets acquired and liabilities assumed in
the 1999 acquisition of the canning assets of Agripac, Inc.
and the 1998 acquisitions of Stokely and the Australian
fresh mushroom business are summarized below:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- ---------------------------------------------------------
<S) <C> <C>
Trade receivables $- $13,728
Inventories 18,524 62,020
Property, plant and equipment 7,426 49,936
Intangibles - 44,479
Accounts payable and accrued
liabilities (4,429) (48,101)
Debt (1,110) (36,414)
Other, net (917) (2,351)
--------- ---------
Net assets acquired $19,494 $83,297
========= =========
</TABLE>
In December 1998, the Company sold its Central American
plastic products operations for $18 million in cash, which
approximated carrying value.
-26-
Note 16 - Quarterly Financial Data (Unaudited)
- ------------------------------------------------------------
The following quarterly financial data are unaudited, but in
the opinion of management include all necessary adjustments
for a fair presentation of the interim results, which are
subject to significant seasonal variations.
<TABLE>
<CAPTION>
1999
(In thousands, except per
share amounts) March 31 June 30 Sep. 30 Dec. 31
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $693,002 $676,857 $567,238 $618,702
Cost of sales (514,775) (536,049) (483,922) (559,660)
Operating income (loss) 77,224 36,171 (20,306) (51,051)
Net income (loss) 48,708 7,324 (36,654) (77,760)
Basic earnings (loss)
per share .68 .05 (.62) (1.25)
Diluted earnings (loss)
per share .60 .05 (.62) (1.25)
Dividends per common share .05 .05 .05 .05
Common stock market price
High 11.75 10.81 8.50 6.00
Low 8.31 7.69 5.50 3.38
</TABLE>
<TABLE>
<CAPTION>
1998
(In thousands, except per
share amounts) March 31 June 30 Sep. 30 Dec. 31
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $717,217 $744,191 $632,126 $626,827
Cost of sales (540,587) (561,900) (509,973) (593,587)
Operating income (loss) 69,770 74,216 12,548 (77,925)
Net income (loss) 41,078 52,842 (10,756) (101,576)
Basic earnings (loss)
per share .58 .75 (.23) (1.62)
Diluted earnings (loss)
per share .52 .66 (.23) (1.62)
Dividends per common share .05 .05 .05 .05
Common stock market price
High 16.00 14.44 14.25 12.44
Low 12.63 13.06 10.25 9.50
</TABLE>
The operating losses in the third and fourth quarters of
1999 include charges of $6 milion and $3 million,
respectively, from a workforce reduction program.
The 1998 Cost of sales includes $74 million of fourth
quarter write-downs and costs, net of minimum expected
insurance recoveries, resulting from significant damage in
Honduras and Guatemala caused by Hurricane Mitch.
Per share results include the dilutive effect of assumed
conversion of preferred and preference stock, convertible
debentures and options into common stock during the period
presented. The effects of assumed conversions are
determined independently for each respective quarter and
year and may not be dilutive during every period due to
variations in operating results. Therefore, the sum of
quarterly per share results will not necessarily equal the
per share results for the full year.
-27-
<TABLE>
<CAPTION>
Chiquita Brands International, Inc.
SELECTED FINANCIAL DATA
(In thousands, except
per share amounts) 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FINANCIAL CONDITION
Working capital $414,445 $308,805 $300,348 $379,977 $366,893
Capital expenditures 152,080 118,250 76,248 74,641 64,640
Total assets 2,596,127 2,509,133 2,401,613 2,466,934 2,623,533
Capitalization
Short-term debt 129,754 169,279 152,564 135,089 172,333
Long-term debt 1,227,001 1,002,606 961,972 1,079,251 1,242,046
Shareholders' equity 705,286 793,980 780,086 724,253 672,207
OPERATIONS
Net sales $2,555,799 $2,720,361 $2,433,726 $2,435,248 $2,565,992
Operating income* 42,038 78,609 100,166 84,336 175,770
Income (loss) from
continuing operations(58,382) (18,412) 343 (27,728) 27,969
Discontinued operations - - - - (11,197)
Extraordinary loss from
debt refinancing - - - (22,838) (7,560)
Net income (loss)* (58,382) (18,412) 343 (50,566) 9,212
SHARE DATA
Shares used to calculate
diluted earnings (loss)
per common share 65,768 64,663 57,025 55,195 53,650
Diluted earnings (loss)
per common share:
- Continuing
operations $(1.15) $(.55) $(.29) $(.72) $.37
- Discontinued
operations - - - - (.21)
- Extraordinary items - - - (.41) (.14)
- Net income (loss) (1.15) (.55) (.29) (1.13) .02
Dividends per common share .20 .20 .20 .20 .20
Market price per
common share:
High 11.75 16.00 18.00 16.38 18.00
Low 3.38 9.50 12.75 11.50 12.25
End of year 4.75 9.56 16.31 12.75 13.75
</TABLE>
* See Management's Analysis of Operations and Financial
Condition and Notes to Consolidated Financial Statements
for a discussion of significant items included in
operating income in 1999 and 1998.
-28-
DIRECTORS, OFFICERS AND SENIOR OPERATING MANAGEMENT
<TABLE>
<CAPTION>
SENIOR OPERATING
BOARD OF DIRECTORS OFFICERS MANAGEMENT
- ---------------------- ------------------ -------------------
<S> <C> <C>
CARL H. LINDNER 1* CARL H. LINDNER 1* ROBERT F.KISTINGER
Chairman of the Board, Chairman of the Board, President and Chief
Chief Executive Officer Chief Executive Officer Operating Officer
and Chairman of the and Chairman of the Chiquita Fresh Group
Executive Committee Executive Committee and Chiquita Fresh
Group - North America
KEITH E. LINDNER 1* KEITH E. LINDNER 1*
Vice Chairman of the Vice Chairman of the PETER A. HOREKENS
Board Board President
Chiquita Fresh Group -
STEVEN G. WARSHAW 1 STEVEN G. WARSHAW 1 Europe
President and Chief President and Chief
Operating Officer Operating Officer DENNIS M. DOYLE
President - Far and
FRED J. RUNK * CARLA A. BYRON Middle East, Austral/
Senior Vice President Vice President, Asia Region
and Treasurer, Corporate Planning
American Financial
Group, Inc. JOSEPH W. HAGIN II
Vice President,
JEAN HEAD SISCO 2,3 Corporate Affairs
Partner in Sisco
Associates JEFFREY T. KLARE
(management Vice President,
consultants) Information Systems
WILLIAM W. VERITY 2,3 GERALD R. KONDRITZER
Chairman and Chief Vice President and
Executive Officer, Treasurer
ENCOR Holdings, Inc.
(developer and manu- WARREN J. LIGAN
facturer of plastic Senior Vice President
molded components) and Chief Financial
Officer
OLIVER W. WADDELL 2,3
Retired Chairman, ROBERT W. OLSON
President and Chief Senior Vice President,
Executive Officer, General Counsel and
Star Banc Corporation Secretary
WILLIAM A. TSACALIS
1 Member of Executive Vice President and
Committee Controller
2 Member of Audit
Committee BRYAN M. VALENTINE
3 Member of Vice President,
Compensation Human Resources
Committee
* Associated as a
director or officer
of American Financial
Group, Inc. (engaged in
property and casualty
insurance and the sale
of annuities) which owned
approximately 36% of the
voting stock of Chiquita
Brands International,
Inc. as of March 15,
2000.
</TABLE>
INVESTOR INFORMATION
- ----------------------------
STOCK EXCHANGE LISTINGS
- ----------------------------
New York, Boston and Pacific
STOCK SYMBOL
- ------------
CQB
SHAREHOLDERS OF RECORD
- ----------------------------------------------------------
At March 15, 2000, there were 5,501 common shareholders of
record.
TRANSFER AGENT AND REGISTRAR -
PREFERRED, PREFERENCE AND COMMON STOCK
- --------------------------------------
Chiquita Brands International, Inc.
c/o Securities Transfer Company
One East Fourth Street
Cincinnati, Ohio 45202
(513) 579-2414
(800) 368-3417
DIVIDEND REINVESTMENT
- -------------------------------------------------------
Shareholders who hold at least 100 common shares may
increase their investment in Chiquita shares through the
Dividend Reinvestment Plan without payment of any brokerage
commission or service charge. Full details concerning the
Plan may be obtained from Investor Relations or the Transfer
Agent.
ANNUAL MEETING
- ------------------------------
May 10, 2000
10 a.m. Eastern Daylight Time
Omni Netherland Plaza Hotel
35 West Fifth Street
Cincinnati, Ohio 45202
INVESTOR INQUIRIES
- ------------------------------------------------------------
For other questions concerning your investment in Chiquita,
contact Investor Relations at (513) 784-6366.
TRUSTEES AND TRANSFER AGENTS -
DEBENTURES/NOTES
- ------------------------------------------
7% Convertible Subordinated Debentures due
March 28, 2001
Trustee-
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Transfer, Paying and Conversion Agents -
The Chase Manhattan Bank -
New York, New York
The Chase Manhattan Bank -
London, England
Banque Paribas Luxembourg S.A. -
Luxembourg
Banque Bruxelles Lambert S.A. -
Brussels, Belgium
Bank Leu, Ltd. -
Zurich, Switzerland
9 1/8% Senior Notes due March 1, 2004*
9 5/8% Senior Notes due January 15, 2004*
10% Senior Notes due June 15, 2009*
10 1/4% Senior Notes due November 1, 2006*
Trustee -
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
* Chiquita Brands International, Inc., c/o Securities
Transfer Company, is transfer agent for these Notes.
EXHIBIT 21
CHIQUITA BRANDS INTERNATIONAL, INC.
SUBSIDIARIES
As of March 27, 2000, the major subsidiaries of the Company,
the jurisdiction in which organized and the percent of voting
securities owned by the immediate parent corporation were as
follows:
<TABLE>
<CAPTION>
Percent of
Voting Securities
Organized Owned by
Under Laws of Immediate Parent
------------- -----------------
<S> <C> <C>
Chiquita Brands, Inc. Delaware 100%
American Produce Company Delaware 100%
California Day-Fresh Foods, Inc. California 100%
Caribbean Enterprises, Inc. Delaware 100%
Great White Fleet Ltd. Bermuda 100%
BVS Ltd. Bermuda 100%
CDV Ltd. Bermuda 100%
CDY Ltd. Bermuda 100%
CRH Shipping Ltd. Bermuda 100%
Danfund Ltd. Bermuda 100%
Danop Ltd. Bermuda 100%
DSF Ltd. Bermuda 100%
GPH Ltd. Bermuda 100%
Great White Fleet (US) Ltd. Bermuda 100%
NCV Ltd. Bermuda 100%
Norvel Ltd. Bermuda 100%
Chiquita Brands Company, North America Delaware 100%
CB Containers, Inc. Delaware 100%
OV Containers, Inc. Delaware 100%
Chiquita Citrus Packers, Inc. Delaware 80%
Chiquita Banana Company B.V. Netherlands 100%
Chiquita Italia, S.p.A. Italy 100%
Chiquita Finland Oy Finland 100%
Chiquita Tropical Fruit Company B.V. Netherlands 100%
Chiquita Frupac Inc. Delaware 100%
Chiquita Gulf Citrus, Inc. Delaware 100%
Chiquita International Trading Company Delaware 100%
Chiquita Far East Holdings B.V. Netherlands 100%
Chiquita Brands South
Pacific Limited Australia 49%
CBSP Pty. Ltd. Australia 100%
Chiquita Mushrooms Holdings
Pty Ltd Australia 100%
Chiquita International Limited Bermuda 100%
Tela Railroad Company Ltd. Bermuda 100%
M.M. Holding Ltd. Bermuda 100%
Chiquita Tropical Products Company Delaware 100%
Chiriqui Land Company Delaware 100%
Compania Agricola del Guayas Delaware 100%
Compania Agricola de Rio Tinto Delaware 100%
Compania Bananera Atlantica Limitada Costa Rica 100%
Dunand et Compagnie des Bananes, S.A. France 100%
Maritrop Trading Corporation Delaware 100%
Progressive Produce Corporation Ohio 100%
Compania Mundimar, S.A. Costa Rica 100%
Friday Holdings, L.L.C. Delaware 100%
Chiquita Processed Foods, L.L.C. Delaware 100%
</TABLE>
The names of approximately 200 subsidiaries have been omitted.
In the aggregate these subsidiaries, after excluding
approximately 100 foreign subsidiaries whose immediate parents
are listed above and which are involved in fresh foods
operations, do not constitute a significant subsidiary. The
consolidated financial statements include the accounts of the
Company and all majority-owned subsidiaries.
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual
Report on Form 10-K of Chiquita Brands International, Inc. of our
report dated February 8, 2000, included in the 1999 Annual Report
to Shareholders of Chiquita Brands International, Inc.
Our audits also included the financial statement schedules of
Chiquita Brands International, Inc. listed in Item 14(a). These
schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material
respects the information set forth therein.
We also consent to the incorporation by reference in the
following Registration Statements and related prospectuses of
Chiquita Brands International, Inc. of our report dated
February 8, 2000, with respect to the consolidated financial
statements and schedules of Chiquita Brands International, Inc.
incorporated by reference in the Annual Report on Form 10-K for
the year ended December 31, 1999.
<TABLE>
<CAPTION>
Registration
Form No. Description
----- ------------ ---------------
<S> <C> <C>
S-3 33-58424 Dividend Reinvestment Plan
S-3 33-41057 Common Stock issuable upon conversion of
Convertible Subordinated Debentures
S-3 333-00789 Debt Securities, Preferred Stock,
Preference Stock, Depositary Shares,
Common Stock and Securities Warrants
S-8 33-2241 Chiquita Savings and Investment Plan
33-16801
33-42733
33-56572
333-39671
333-93517
S-8 33-14254 1986 Stock Option and Incentive Plan
33-38284
33-41069
33-53993
S-8 333-59085 1998 Stock Option and Incentive Plan
S-8 33-38147 Associate Stock Purchase Plan
S-8 333-59063 1997 Amended and Restated Deferred
Compensation Plan
</TABLE>
/s/ ERNST & YOUNG LLP
Cincinnati, Ohio
March 27, 2000
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned officers and directors of Chiquita
Brands International, Inc. (the Company), hereby severally
constitute and appoint William A. Tsacalis and Robert W. Olson,
and each of them singly, our true and lawful attorneys and agents
with full power to them and each of them to do any and all acts
and things in connection with the preparation and filing of the
Company's Annual Report on Form 10-K for the year ended December
31, 1999 (the Report) pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, and any rules,
regulations and requirements of the Securities and Exchange
Commission thereunder including specifically, but without
limiting the generality of the foregoing, the power and authority
to sign in the name of the Company and the names of the
undersigned directors and officers in the capacities indicated
below the Report, any and all amendments and supplements thereto
and any and all other instruments and documents which said
attorneys and agents or any of them may deem necessary or
advisable in connection therewith.
<TABLE>
<CAPTION>
Signature Title Date
- ----------------- --------------------- ---------------
<S> <C> <C>
Chairman of the Board March , 2000
(Carl H. Lindner) and Chief Executive
Officer
Director, Vice Chairman March , 2000
(Keith E. Lindner) of the Board
Director, President March , 2000
(Steven G. Warshaw) and Chief Operating
Officer
Director March , 2000
(Fred J. Runk)
/s/ Jean Head Sisco Director March 27, 2000
(Jean Head Sisco)
/s/ William W. Verity Director March 27, 2000
(William W. Verity)
/s/ Oliver W. Waddell Director March 27, 2000
(Oliver W. Waddell)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Chiquita
Brands International, Inc. Form 10-K for the year ended December 31, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 97,863
<SECURITIES> 0
<RECEIVABLES> 221,955
<ALLOWANCES> 12,214
<INVENTORY> 421,806
<CURRENT-ASSETS> 902,867
<PP&E> 1,892,729
<DEPRECIATION> 714,906
<TOTAL-ASSETS> 2,596,127
<CURRENT-LIABILITIES> 488,422
<BONDS> 1,227,001
0
253,475
<COMMON> 659
<OTHER-SE> 451,152
<TOTAL-LIABILITY-AND-EQUITY> 2,596,127
<SALES> 2,555,799
<TOTAL-REVENUES> 2,555,799
<CGS> 2,094,406
<TOTAL-COSTS> 2,094,406
<OTHER-EXPENSES> 90,888
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 112,033
<INCOME-PRETAX> (50,082)
<INCOME-TAX> 8,300
<INCOME-CONTINUING> (58,382)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,382)
<EPS-BASIC> (1.15)
<EPS-DILUTED> (1.15)
</TABLE>
